Attached files
AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3,
2010
FILE NO. 333-161522
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment
No. 6 to
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
MIDAS
MEDICI GROUP HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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8742
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37-1532843
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(State or jurisdiction of incorporation or
organization)
|
(Primary
Standard Industrial Classification Code Number)
|
(I.R.S.
Employer Identification No.)
|
445 Park
Avenue, 20th
Flr.
New York,
New York 10022
(212)
792-0920
(Address
and telephone number of principal executive offices)
Nana
Baffour, CFA
Chief
Executive Officer & Co-Executive Chairman
445 Park
Avenue, 20th
Flr.
New York,
New York 10022
(212)
792-0920
(Name,
address and telephone number of agent for service)
Thomas
A. Rose, Esq
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Stephen
A. Weiss, Esq
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||
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Marcelle
S. Balcombe, Esq.
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Janet
Gabel, Esq.
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Sichenzia
Ross Friedman Ference LLP
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Hodgson
Russ, LLP
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||
61
Broadway, 32nd Floor
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1540
Broadway
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New
York, New York 10006
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New
York, New York 10036
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||
T:
(212) 930-9700
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T:
(212) 751-4300
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||
F:
(212) 930-9725
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F:
(212) 751-0928
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||
Approximate date of commencement of
proposed sale to the public: As soon as practicable after this
Registration Statement becomes effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. o
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
(COVER
CONTINUES ON FOLLOWING PAGE)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
oLarge accelerated
filer
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oNon-accelerated
filer
|
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oAccelerated
filer
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x Smaller reporting
company
|
|
CALCULATION
OF REGISTRATION FEE
Title
of each class of securities
to
be registered
|
Amount
to be Registered
|
Proposed
Maximum Offering Price Per Share (1)
|
Proposed
Maximum Aggregate Offering Price
|
Amount
of Registration Fee
|
||||||||||||
Common
Stock, $0.001 par value (2)
|
575,000
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$
|
5.00
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$
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2,875,000
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$
|
417.10
|
|||||||||
Common
Stock, $0.001par value (3)
|
25,000
|
$
|
6.00
|
$
|
150,000
|
$
|
18.50
|
|||||||||
Total
Registration Fee
|
$
|
435.60
|
*
|
*previously
paid.
(1)
Estimated solely for purposes of calculating the registration fee in accordance
with Rule 457(o) under the Securities Act of 1933.
(2)
Includes shares of common stock issuable upon the exercise of a 45-day option
granted to the registration to the underwriter to cover over-allotments, if
any.
(3)
Issuable to the underwriter upon exercise of warrants of the registrant,
exercisable at no less than 120% of the initial public offering price of the
registrant’s shares and expiring five years from the effective date of this
registration statement.
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Preliminary
Prospectus
|
Subject
To Completion, Dated February 3,
2010
|
MIDAS
MEDICI GROUP HOLDINGS, INC.
500,000
Shares of Common Stock
This is a
firm commitment public offering of 500,000 shares of our common stock. We expect
that the public offering price of our common stock will be $5.00 per share.
Certain
of our affiliates may convert outstanding debt of up to $250,000 in this
offering, pursuant to which they will purchase shares of our common stock at the
public offering price, which will constitute part of the 250,000 shares to be
sold in this offering.
We are a
reporting company under Section 13 of the Securities Exchange Act of 1934, as
amended.
There is
no public market for our securities. On or about the date of this
prospectus, we intend to have our common stock quoted for trading on the FINRA
OTC Bulletin Board. There can be no assurance that our common stock will ever be
quoted on a quotation service or a stock exchange or that any market for our
securities will develop.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning
on page 9 of this prospectus for a discussion of information that should be
considered in connection with an investment in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
Public
Offering
Price
|
Underwriting
Discount
and
Commissions(1)
|
Proceeds,
to
Us,
Before
Expenses(2)
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||||||||||
Per
share
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$ | $ | $ | |||||||||
Total
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$ | $ | $ |
(1)
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Does
not include a non-accountable expense allowance equal to 1% of the gross
proceeds of this offering payable to National Securities, as
representative of the several underwriters estimated at $_________.
We have also agreed to issue to the representative of the underwriters
warrants to purchase up to 25,000 shares of our common stock at an
exercise price equal to 120% of the per share offering price, exercisable
for a four year period commencing one year after the effective date of
this prospectus. The foregoing warrant will only be issued to
the representative of the underwriters and permitted officers or employees
of the representative.
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|||
(2)
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We
estimate that the total expenses of this offering, excluding the
underwriters’ discount and non-accountable expenses allowance, will be
approximately $ 364,313 .
|
We have
granted the underwriters a 45-day option to purchase up to 75,000 additional shares from us to cover over-allotments,
if any. If the underwriters exercise the over-allotment option in full, the net
proceeds to us will be $________.
We are
offering the shares for sale on a firm-commitment basis. The underwriters expect
to deliver our securities to investors in the offering on or about
___________ , 2010.
NATIONAL
SECURITIES CORPORATION
|
|
|
ARDOUR CAPITAL INVESTMENTS, LLC |
The
date of this prospectus is_________, 2010.
Until
[*], 2010, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
No
dealer, salesperson or any other person is authorized to give any information or
make any representations in connection with this offering other than those
contained in this prospectus and, if given or made, the information or
representations must not be relied upon as having been authorized by us. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the securities offered by this prospectus, or an
offer to sell or a solicitation of an offer to buy any securities by anyone in
any jurisdiction in which the offer or solicitation is not authorized or is
unlawful.
TABLE
OF CONTENTS
Page
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Prospectus
Summary
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1
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|||
The
Offering
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7
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|||
Summary
Historical Consolidated Financial
Data
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8
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|||
Risk
Factors
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9
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|||
Determination
of Offering Price
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16
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|||
Special
Note Regarding Forward-Looking Statements
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16
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Use
of Proceeds
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17
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Dividend Policy | 17 | |||
Capitalization
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17
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Dilution
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18
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Unaudited
Pro Forma Condensed Consolidated Financial Data
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19
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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22
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Business
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30
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Description
of Properties
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44
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Legal
Proceedings
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44
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Market
for Common Stock and Related Stockholder Matters
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44
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Directors,
Executive Officers, Promoters and Control Persons
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46
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Executive
Compensation
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50
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Security
Ownership of Certain Beneficial Owners and Management
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52
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Certain
Relationships and Related Transactions
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53
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Underwriting
and Conflicts of Interest
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55
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Description
of Securities
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57
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|||
Legal
Matters
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58
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|||
Experts
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58
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|||
Changes
in Registrant’s Certifying Accountant
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58
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Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
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58
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Where
You Can Find More Information
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59
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Index
to Financial Statements
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F-1
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You
should rely only on the information contained or incorporated by reference to
this prospectus in deciding whether to purchase our common stock. We
have not authorized anyone to provide you with information different from that
contained or incorporated by reference to this prospectus. Under no
circumstances should the delivery to you of this prospectus or any sale made
pursuant to this prospectus create any implication that the information
contained in this prospectus is correct as of any time after the date of this
prospectus. To the extent that any facts or events arising after the date of
this prospectus, individually or in the aggregate, represent a fundamental
change in the information presented in this prospectus, this prospectus will be
updated to the extent required by law.
We
obtained statistical data, market data and other industry data and forecasts
used throughout this prospectus from market research, publicly available
information and industry publications. Industry publications generally state
that they obtain their information from sources that they believe to be
reliable, but they do not guarantee the accuracy and completeness of the
information. Nevertheless, we are responsible for the accuracy and completeness
of the historical information presented in this prospectus, as of the date of
the prospectus.
PROSPECTUS
SUMMARY
This
summary highlights certain information appearing elsewhere in this prospectus.
For a more complete understanding of this offering, you should read the entire
prospectus carefully including the risk factors, our business description and
the consolidated financial statements and notes related to those statements
included elsewhere in this prospectus. Unless the context indicates otherwise,
as used in this prospectus, “Midas Medici” or the “Registrant” refers only to
Midas Medici Group Holdings, Inc., a Delaware corporation, and “we”, “us”, “our”
or the “Company” refers to Midas Medici, together with our wholly-owned
subsidiary Utilipoint International, Inc. (“Utilipoint”) and its 60% owned
subsidiaries The Intelligent Project LLC. and Utilipoint, s.r.o., in the
Czech Republic. The term “year” or “fiscal year” refers to the year ended
December 31. All share and per share information assumes an initial offering
price of $5.00 per share.
Midas
Medici Group Holdings, Inc.
Overview
We are a
clean energy company that provides services to utilities and others to further
the development of the electric grid. The electric grid is the entire
infrastructure available to generate, transmit, and distribute electricity to
end users. We define the “Smart Grid” as the electrical grid, enhanced by
technologies and solutions designed to make it function more efficiently,
reliably and securely.
In much
the same way that technological advances in microprocessors, power electronics
and the internet revolutionized the telecommunications industry, we believe that
technological advances are transforming the traditional electrical grid into a
smarter grid and significantly improving its capabilities. Key
elements of the Smart Grid include the ability to: introduce clean energy
sources into the grid; collect, transmit, store and analyze data from the grid;
communicate information between all segments of the grid; automate certain
functions of the grid using advanced control systems and devices; and reduce the
carbon footprint using various products, processes and services for remote
demand management and ensuring affordability of electrical power.
In
October 2008, the U.S. Department of Energy released a study, “The Smart Grid:
An Introduction”, in which it estimated that for the past 20 years, demand
growth has exceeded supply growth by 25% per year. As a result, power outages
are estimated to cost U.S. businesses $100 billion per year, with 41% more power
outages in the second half of the 1990s than in the first half. Smart Grid
enhancements will ease congestion and increase utilization of generating
capacity, allowing between 50% to 300% more electricity to be sent through the
existing electrical grid.
Through
our wholly-owned subsidiary, Utilipoint we provide energy industry consulting
services and proprietary research in seven practice areas that encompass the
entire energy and utility value chain, including:
·
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Smart
Meter Deployment,
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·
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Energy
Investments & Business Planning,
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·
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CommodityPoint,
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·
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Meter-to-Cash,
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·
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Pricing
& Demand Response,
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·
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Public & Regulatory Issues
Management, and
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·
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The
Intelligent Project.
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With its
origins dating back to 1933, Utilipoint built its reputation in the power
utility industry by supplying market data to United States utilities. Today,
Utilipoint is a full service energy-focused consulting firm, providing
independent research, information, analysis, and consulting to energy companies,
utilities, investors, regulators, and industry service providers. Our
clients include utilities, investors, regulators, and energy industry vendors
and service providers, both domestically and internationally.
According
to the International Energy Agency’s (“IEA”) World Energy Outlook 2008, electric
power infrastructure will require cumulative worldwide investment of over $13.6
trillion (in 2007 dollars) from 2007-2030. On a national level, and according to
the Brattle Group, investment totaling approximately $1.5 trillion will be
required between 2010 and 2030 to pay for grid infrastructure in the United
States 1. We
believe we are well positioned to benefit from this anticipated market
opportunity.
1 The Brattle
Group, “Transforming America’s Power Industry”, November 2008
1
With
Utilipoint’s acquisition of 60% of The Intelligent Project, LLC, completed in
July 2009, we now have the ability to provide additional consulting services,
which complement our current service offerings, to help clients understand and
consider the Smart Grid’s impact. We believe this knowledge will
provide critical intelligence to enable our clients to successfully deploy Smart
Grid solutions. We provide our consulting services and proprietary
research using multi-disciplinary teams with deep subject matter expertise,
analytical methodologies, primary research and proprietary databases and
web-based survey tools. We also host annual conferences in the U.S. and Europe
targeted to our client base to discuss topical issues in the Clean Energy and
Smart Grid sectors. As of September 30, 2009, more than 50% of our
professional staff held post-graduate degrees in such diverse fields as
economics, engineering, business administration, information technology, law,
life sciences and public policy. Our senior managers have considerable industry
and project management experience and an average tenure of more than 20 years in
the industry. We believe this diverse pool of intellectual capital is what
enables us to assemble the multi-disciplinary teams that can provide creative
solutions to our clients’ most pressing problems. We are
headquartered in New York, New York. Our subsidiary, Utilipoint is headquartered
in Albuquerque, New Mexico, with two domestic regional offices in Tulsa,
Oklahoma and Sugar
Land, Texas, and it maintains international operations through its office
in Brno, Czech Republic. The Intelligent Project, LLC is located in
West Lafayette, Indiana.
Our
Strategy
Our goal
is to become a global leader in alternative energy and Smart Grid solutions. Our
strategy is to grow our business both organically and through acquisitions by
leveraging the knowledge and experience of Utilipoint and our management
team’s extensive experience owning and operating businesses. Prior to joining
our company, our management team has acquired and operated businesses with an
aggregate enterprise value of approximately $600 million in the energy services
sector. We intend to identify new areas of growth and expand our activities
beyond our current consulting business. We target the following areas of
growth: engineering services, data warehousing and information technologies and
financial services.
Accelerate
organic growth
Our
organic growth strategy is to increase the number of customers and the value of
services we sell to them. We intend to achieve this by building technology
systems and a back-office infrastructure, complemented by investing in market
awareness of the Utilipoint brand to support our consultants. This
strategy is designed to generate significant financial and operational leverage
by raising the utilization rate of our consultants and by growing the revenue
they generate from our technology tools. We expect that as we employ additional
consultants with significant industry expertise at increased rates to reflect
their higher level of experience, this will increase revenue without
significantly increasing costs.
Pursue
strategic acquisitions
The core
of our growth strategy includes executing strategic acquisitions of companies
providing services and solutions that support the development of the Smart Grid.
We plan to pursue a disciplined acquisition strategy to obtain new customers,
increase our size and market presence and obtain capabilities that complement
our existing portfolio of services, while focusing on cultural compatibility and
financial impact. We made our first acquisition in August 2009, when we acquired
Utilipoint, a full service energy-focused consulting firm, providing independent
research, information, analysis, and consulting to energy companies, utilities,
investors, regulators, and industry service providers.
Some of
the types of businesses that we have currently identified for possible
acquisition include:
·
|
Engineering
companies that provide enabling solutions to the Smart Grid
infrastructure;
|
·
|
Technology
companies that provide data warehousing technology infrastructure and data
center solutions;
|
·
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Companies
that facilitate financing of energy efficiency initiatives for consumers
and commercial enterprises; and
|
·
|
Other
companies or products and services aimed at commercial/industrial
customers and consumers to impact the Smart
Grid.
|
2
We
currently have no agreements or arrangements for any
acquisitions. There can be no assurance that we will be able to
consummate any strategic acquisitions, or if we are able to do so, that any one
or more of the acquisitions will prove to be profitable or otherwise beneficial
to our Company.
Leverage
our management team’s diverse industry experience
Our
management team, led by our CEO, Nana Baffour, and President, Johnson Kachidza,
possesses a breadth and depth of industry experience which we believe will
enable us to achieve our growth objectives. We believe that our relationships
with executive level management at utilities, regulators, vendors, technology
leaders and investment professionals who are active in the utility space will
serve us well as we continue to execute our business strategy. We believe that
our experience and expertise will maximize our chances of succeeding in
acquiring and managing energy services companies, which we define as
non-generation companies supporting the energy sector, whose customers include
utilities, educational institutions, automobile manufacturers, architectural
engineering firms, technology providers, general manufacturers and local
municipalities.
Grow
our client base and increase the scope of services provided to existing
clients
According
to the Earnest Orlando Lawrence Berkley National Laboratory’s research report
entitled “A Survey of the ESCO
Industry: Market Growth and Development from 2000 to 2006,” the energy
consulting and energy services market is sized at approximately $3.6
billion. The overall Smart Grid market opportunity, according to the
Energy Information Administration’s (“EIA”) World Energy Outlook 2008, is
approximately $13.6 trillion (in 2007 dollars) for the period 2007-2030. We
intend to capitalize on this large market and grow our client base by expanding
our geographic presence domestically and internationally, while expanding the
scope of services we provide. In addition, we intend to invest in development
and marketing initiatives in order to strengthen our brand recognition among
potential clients.
Focus on higher margin contracts and
recurring revenue
We plan
to focus our efforts on obtaining energy consulting assignments in the form of
subscription-based revenues and bundled service agreements, which we believe
will provide us with higher profit margins and increase the share of our revenue
that is recurring. We also intend to expand and improve our existing databases
in order to increase our revenues from subscriptions to those
databases.
Strengthen
our end-to-end service offerings
We plan
to increase our revenue from research, advisory and consulting services, which
include information technology solutions, executive level panels, primary
research, project management, and conferences.
Build
upon our brand equity
Through
our subsidiary Utilipoint, we enjoy 76 years of brand recognition as an energy
industry expert. We intend to distinguish ourselves as a diversified Clean
Energy and Smart Grid focused company.
Capitalize on
operating leverage
We
are building a corporate infrastructure and internal systems that we
believe when in place would be readily scalable and will
accommodate significant growth without a proportionate increase in
expense.
3
Competition
We
operate in a highly competitive and fragmented marketplace and compete against a
number of firms in each of our key markets. A substantial number of
these firms have significantly greater infrastructure and financial resources
than our company.
Competitive
Strengths
Experienced
management team. Our management team possesses extensive
experience acquiring and integrating energy services businesses, relationships
with senior executives throughout the electric energy industry and a
comprehensive understanding of the U.S. regulatory framework. With extensive
experience owning, operating and acquiring companies, members of our management
have a track record of successfully building companies through organic,
strategic and operational expertise and leveraging critical partnerships into
stable and positive cash-flow generating assets.
Highly
experienced professional staff with deep subject matter knowledge. Management
believes the in-depth subject matter knowledge of our experts coupled with our
corporate experience developed over decades of providing advisory services at
the intersection of electricity and technology make us a valuable resource to
our clients and distinguish us from our competitors.
Versatile
advisory services practice. We
believe our advisory approach to consulting and understanding of our clients’
requirements and objectives, gives us a significant competitive advantage,
permitting us to gain access to key client decision makers during the initial
phases of their policy, program, project or initiative, which we hope to
leverage into opportunities for other facets of our business.
Proprietary
analytics and methods which allow us to deliver superior solutions to
clients. We
have developed energy-planning, benchmarking and pricing models that are used by
municipalities and commercial entities in US, Europe and Canada and select
clients in Asia, South America and the Middle East and Africa. In addition, we
have developed a suite of proprietary tools, databases and project management
methodologies that are available to be utilized on client engagements and
leveraged to develop proprietary products.
4
Industry
Background
The
Electrical Power Industry
The
electrical power industry can be divided into four segments: Generation,
Transmission, Distribution, and End-Use Consumption. Generation is the process
of producing electrical energy or the amount of electrical energy produced by
transforming other forms of energy, commonly expressed in kilowatt hours (“KWh”)
or megawatt hours (“MWh”). Transmission refers to the high-voltage,
long-distance transfer of electricity. Distribution refers to medium-voltage,
medium-distance transport from transmission substations to customer meters.
End-Use Consumption is the use of electricity by residential, commercial and
industrial consumers.
The
federal government increased the regulation of the utility industry with the
passage of the Public Utility Holding Company Act of 1935, (“PUHCA”). PUHCA
regulated vertically integrated monopolies that generate, transmit and
distribute electricity to end users in predefined service
regions. These vertically integrated utilities are also regulated at
the federal level by the Federal Energy Regulatory Commission (“FERC”) and at
the state level by the Public Utility Commissions (“PUCs”). The FERC
regulates the interstate transmission of natural gas, oil and electricity,
including wholesale sales of electricity outside a utilities’ predefined
service region, while the PUCs generally regulate the quality of service and
rates charged to retail customers. The rates are designed to recover
a PUC-determined return on investment, as well as other costs incurred by the
utilities.
Over the
past 30 years, the benefits of the monopoly nature of the industry have been
questioned and challenged. Restructuring throughout North America is fostering a
competitive environment in the energy industry. The FERC and the PUCs have
driven an industry restructuring meant to enable and encourage the
development of more efficient generation sources and to permit increased
competition in order to reduce prices. The most fundamental change to the
electrical energy business has been breaking up the vertically integrated
utilities by separating generation from their distribution functions. In these
restructured markets, utility companies continue to operate and maintain local
distribution, delivering electricity to consumers at regulated prices as before,
but power generators and electricity suppliers are now allowed to openly compete
to sell their electricity at market prices. Grid operators, comprised of
independent system operators, referred to as ISOs, or regional transmission
organizations, referred to as RTOs, have been formed in these deregulated
markets to operate the power systems, including transmission lines, energy
trading, coordinating the wholesale of electricity, and establishing electricity
markets. These grid operators are responsible for maintaining federal
reliability standards designed to avoid service disruptions.
Increasingly,
grid operators and utilities in both restructured markets and in traditional
regulated markets are challenged to provide electricity reliably during periods
of peak demand. Recently, Government legislation, such as the Energy Policy Act
of 2005, The Clean Air Act of 2005, the Energy Independence and Security Act of
2007, and the American Recovery and Reinvestment Act of 2009, have
been promulgated to address national and global issues pertaining to energy
security, energy independence and environmental concerns. The key structural
changes in the utility industry and recent legislation have all laid the
groundwork for the implementation and acceleration of the Smart Grid
by:
·
|
Expanding
the sources of generation to include more efficient and environmentally
friendly resources such as solar, biomass and wind;
|
·
|
Opening
access to the transmission and distribution system to facilitate wholesale
trading of electricity between regions to introduce competition;
and
|
·
|
Providing
consumers with choices of where to purchase power further promoting
competition.
|
Once
implemented, we believe the Smart Grid will address the current constraints of
the existing grid and make it function more efficiently, by:
·
|
Improving
reliability through the enhanced monitoring of the grid using
technology-based tools such as digital electronics, visualization
technologies and advanced controls to avoid power
outages;
|
·
|
Maintaining
power affordability by facilitating competition and energy efficiency
through reduced usage;
|
·
|
Reinforcing
U.S. competitiveness by promoting energy independence and energy
security;
|
·
|
Accommodating
renewable energy sources on the
grid;
|
·
|
Helping
reduce the carbon footprint by decreasing consumption and thus reducing
the need to build new fossil fuel power plants;
|
·
|
Increasing
effective supply by reducing blackouts and brownouts through data-driven
grid management, optimizing capacity allocation and demand response and
management;
|
·
|
Facilitating
cost savings for utilities by automating tasks such as meter reading or
remote grid monitoring; and
|
·
|
Introducing
efficiencies yet to be envisioned driven by further advances to the Smart
Grid.
|
Recent acceleration in demand for
power on a global and national scale. According to the EIA, overall U.S.
electricity consumption will be about five trillion KWh by 2030 (World Energy Outlook 2009)
which will require about 218 gigawatts (“GW”) of new generating capacity during
the 2007 to 2030 period (Annual Energy Outlook 2009)
although only 47 GW is under plan today. Given the disparity between the
required capacity and the anticipated capacity, along with constraints in
building new generation capacity, including construction and environmental
costs, the Smart Grid provides a cost-effective and practical opportunity to
optimize the grid to accommodate the increased electrical energy demand while
minimizing these costs.
The Cost of
Under-Investment and Grid Deterioration. Historically,
investment in expanding the grid infrastructure has not generally kept pace with
the increase in demand, creating increased congestion and sub-optimization of
utility operations. The Smart Grid offers a practical solution to
optimize the current grid, reducing infrastructure investment, in order to meet
future demand.
An Evolving
Regulatory Framework. Driven by national and global
environmental, energy security, and energy dependence concerns, new and existing
legislation will continue to constrain the ability to meet energy demand by
building more power plants. As such, the Smart Grid presents a cost effective
solution to meet future electrical energy needs within the constraints of
present and anticipated legislation and environmental
policy.
5
Corporate
History
We were
incorporated in the State of Delaware on October 30, 2006 under the name Mondo
Acquisition I, Inc. We were formed as a vehicle to pursue a business combination
through the acquisition of, or merger with, an operating
business. From inception until May, 2009, we were engaged in
organizational efforts and obtaining initial financing. On May 15, 2009, our
then sole shareholder, Mondo Management Corp., and Midas Medici Group, Inc.
entered into a Purchase Agreement. Pursuant to the Purchase
Agreement, Mondo Management Corp. sold 100%
of the issued and outstanding capital stock of
Mondo Acquisition to Midas Medici Group, Inc. The closing of the transactions
contemplated in the Purchase Agreement resulted in a change in control of the
Company, both in its shareholding and management. Effective May 22, 2009, we
changed our name to Midas Medici Group Holdings, Inc.
On August
10, 2009, Midas Medici entered into an Agreement and Plan of Merger
with Utilipoint and Utilipoint Acquisition Co., a New Mexico corporation
and wholly-owned subsidiary of Midas Medici (the "Merger Sub"). Pursuant to
the Merger Agreement, Merger Sub merged with and into Utilipoint and
Utilipoint became our wholly-owned subsidiary on August 21, 2009. At the closing
of the Merger on August 21, 2009, we ceased to be a shell
company. In connection with the Merger, we issued an aggregate of
1,348,516 shares of common stock to the Utilipoint stockholders in exchange for
42,191 Utilipoint shares and 172,597 options in exchange for 5,400
Utilipoint options. In addition, Knox Lawrence International, LLC, KLI IP
Holding, Inc. and UTP International, LLC, stockholders of Utilipoint,
received an aggregate of 889,444 shares of our common stock
and 27,168 options at the closing of the Merger in exchange for 27,828
shares of Utilipoint and 850 options of Utilipoint. Prior to the merger, Knox
Lawrence International, LLC, owned 6,305 shares (14.9%) of Utilipoint of which
4,855 were acquired on July 23, 2007, 1,250 were acquired on December 31, 2008
and 200 were acquired on January 15, 2009. KLI IP Holding, Inc. owned
0 shares or 0% of Utlipoint and UTP International, LLC owned 21,523 preferred
shares (51%) of Utilipoint which were acquired on July 23, 2007. At
the closing of the merger, the preferred shares were
converted into common shares (51% of Utilipoint) at a ratio of one preferred
share for one common share. In exchange for their shares of
Utilipoint, each of Knox Lawrence International, LLC, KLI IP Holding, Inc. and
UTP International, LLC received, 201,522 shares, 0 shares and 687,922 shares of
Midas Medici, respectively, in connection with the acquisition of Utilipoint by
Midas Medici. KLI IP Holding, Inc. received
27,168 options to acquire shares of Midas Medici at the closing of the merger.
Each of KLI IP Holding and UTP International has no operations
and their sole business is their current ownership of our shares acquired at the
closing of the merger. KLI IP Holding, Inc. and UTP International, LLC are
wholly owned subsidiaries of Knox Lawrence International, LLC. Prior
to the merger, Knox Lawrence International, LLC and its affiliates owned an
aggregate of 65.9% of Utilipoint and upon the consummation of the merger owns
38.5% of Midas Medici, which in turn owns 100% of Utilipoint. Nana Baffour, our
CEO and Johnson Kachidza, our President and CFO are co-founders and Managing
Principals of Knox Lawrence International, LLC. Nana Baffour, our CEO and
Johnson Kachidza, our President are the principal shareholders of Knox Lawrence
International, LLC, KLI IP Holding, Inc. and each own 373.5 membership units or
37.35% of Knox Lawrence International, LLC, 150 shares or 30% of KLI IP Holding,
Inc., no membership units or 0% of UTP International, LLC and have an
indirect ownership in UTP International, LLC through Knox Lawrence
International, LLC.
At the
closing of the Merger, we also issued options to purchase 25,000 shares of our
common stock to David Steele, President of Utilipoint and options to purchase
10,000 of our common stock each to Peter Shaw, Managing Director of The
Intelligent Project, LLC ("IP") and Stephen Schweich, our director.
Knox
Lawrence International, LLC and its affiliates have had a close relationship
with Utilipoint through their ownership interests and by virtue of the
involvement of Messrs Baffour and Kachidza, who in addition to serving as our
CEO and President, respectively, are also Managing Members of Knox Lawrence
International, LLC and control KLI IP Holding, Inc. and UTP International,
LLC.
The
Merger is being accounted for as a reverse merger and recapitalization
which resulted in Midas Medici being the “legal acquirer” and Utilipoint the
“accounting acquirer”. This filing with the Securities and Exchange Commission
(the “SEC”) includes the historical financial results of Utilipoint as of and
for the periods ended September 30, 2009 and 2008 and Midas Medici, and its
subsidiaries only as of and for the period commencing August 21, 2009, the date
of the reverse merger.
References
herein to Utilipoint common shares have been retrospectively adjusted to
reflect the exchange ratio of 31.96217203 Midas Medici common shares for each
share of Utilipoint common stock established in the Merger
Agreement.
Utilipoint,
together with its subsidiaries, is a utility and energy consulting and issues
analysis firm. Utilipoint offers public issues and regulatory management,
advanced metering infrastructure and meter data management, rates and demand
response, utility energy and technology, trading and risk management, and energy
investment services. Utilipoint provides its services to energy companies,
utilities, investors, regulators, and industry service providers primarily in
North America and Europe. Utilipoint also serves select clients in Asia, South
America, Africa and the Middle East. Utilipoint is headquartered in Albuquerque,
New Mexico, with two offices in Tulsa, Oklahoma and Sugar Land, Texas, and is
incorporated under the laws of the State of New Mexico. Utilipoint also has a
wholly owned subsidiary, Utilipoint, s.r.o., in the Czech Republic and maintains
its international operations through its office in Brno, Czech Republic. In July
2009, Utilipoint acquired a controlling interest in IP. IP is a research and
advisory services firm addressing the challenges that utilities face in
advancing and solving electricity consumers’ needs related to the Smart Grid.
IP, which was incorporated on March 10, 2009, is
headquartered in West Lafayette, Indiana.
Corporate
Information
Our
executive offices are located at 445 Park Avenue, 20th Floor, New York, New
York, 10022. Our telephone number is (212) 792-0920. Utilipoint’s web address is
www.utilipoint.com.
The information contained on, or that can be accessed through, Utilipoint’s
website is not a part of this prospectus. We have included the website address
in this prospectus solely as an inactive textual reference.
6
THE
OFFERING
Securities
being offered
|
500,000 shares of common stock
.
|
|
Over-allotment
option
|
Up
to an additional 75,000 shares of common stock
may be issued in the event that the underwriters exercise their
over-allotment option within 45 days of the effective date of the
registration statement of which this
prospectus
is a part.
|
|
Common
stock outstanding before
this
offering
|
2,310,516
shares
|
|
Common
stock outstanding after this offering
|
2,810,516 shares (1)
|
|
Use
of proceeds
|
Repayment
of debt and accrued expenses; website and database upgrades;
marketing
and infrastructure expenses; investment in strategic partnerships; and
working capital, including acquisition and transactions costs. Certain
of our affiliates may convert outstanding debt of up to $250,000 in this
offering, pursuant to which they will purchase shares of our common stock
at the public offering price, which will constitute part of the 250,000
shares to be sold in this offering. In the event that our insiders
convert their outstanding debt into shares, such outstanding debt will be
reduced and/or cancelled, as the case may be, and we will not receive the
proceeds of the issuance of such
shares.
|
|
Underwriters’
compensation
|
·
·
·
|
8%
of the public offering price
1%
non-accountable expense allowance
Warrants
to purchase 25,000 shares of common stock at
an exercise price of 120% of the public offering price, exercisable on the
first anniversary of the effective date of this prospectus and expiring on
the fifth anniversary of the date of this
prospectus.
|
Risk
Factors
|
The
securities offered by this prospectus are speculative and involve a
high
degree
of risk and investors purchasing securities should not purchase
the
securities
unless they can afford the loss of their entire investment.
See
“Risk
Factors” beginning on page 9.
|
|
_______________________________
(1)
Excludes (i) up to 75,000 shares of common stock
that may be sold by us to the underwriters to cover over-allotments, (ii) 25,000 shares of our common stock issuable upon exercise
of warrants to be issued to the underwriters in connection with this offering,
and (iii) 650,000 shares of common stock reserved for issuance under our stock
option plan.
7
SUMMARY
HISTORICAL CONSOLIDATED FINANCIAL DATA
The
table below is a summary of the audited consolidated financial
data for the fiscal years ended December 31, 2008 and 2007 and the
unaudited consolidated financial data for the nine months ended September
30, 2009 and 2008.
Historical
results are not necessarily indicative of the results that may be expected for
any future period. The information presented below is only a summary and should
be read in conjunction with our consolidated financial statements and related
notes and “Management's Discussion and Analysis of Financial Condition and
Results of Operations” included elsewhere in this prospectus.
Fiscal
Year Ended
|
Fiscal
Year Ended
|
Nine
Months Ended
|
Nine
Months Ended
|
|||||||||||||
December
31,
|
December
31,
|
September
30,
|
September
30,
|
|||||||||||||
2008
|
2007
|
2009
|
2008
|
|||||||||||||
Restated | ||||||||||||||||
Statement
of Operations Data
|
||||||||||||||||
Net
Revenues
|
$ | 3,660,941 | $ | 3,910,392 | $ | 2,566,962 | $ | 2,826,650 | ||||||||
Cost
of Services
|
2,037,046 | 2,149,136 | 1,445,193 | 1,485,006 | ||||||||||||
Gross
Margin
|
1,623,895 | 1,761,256 | 1,121,769 | 1,341,644 | ||||||||||||
Operating
Expenses
|
||||||||||||||||
Selling,
general and administrative
|
1,777,613 | 1,548,028 | 1,784,968 | 1,338,676 | ||||||||||||
Depreciation
and amortization
|
17,845 | 10,871 | 13,835 | 12,207 | ||||||||||||
Management
fees
|
100,000 | 25,000 | - | - | ||||||||||||
Total
operating expenses
|
1,895,458 | 1,583,899 | 1,798,803 | 1,350,883 | ||||||||||||
Operating
income (loss)
|
(271,563 | ) | 177,357 | (677,034 | ) | (9,239 | ) | |||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
income
|
1 | 1,974 | 2 | - | ||||||||||||
Interest
expense
|
(63,942 | ) | (66,381 | ) | (62,855 | ) | (49,332 | ) | ||||||||
Other
income
|
- | 850 | - | - | ||||||||||||
Total
other income (expense)
|
(63,941 | ) | (63,557 | ) | (62,853 | ) | (49,332 | ) | ||||||||
Income
(loss) before income taxes
|
(335,504 | ) | 113,800 | (739,887 | ) | (58,571 | ) | |||||||||
Provision
(benefit) for income taxes
|
(35,815 | ) | 45,737 | 2,077 | (1,362 | ) | ||||||||||
Net
income (loss)
|
(299,689 | ) | 68,063 | (741,964 | ) | (57,209 | ) | |||||||||
Less:
Net loss attributable to the non-controlling interest
|
- | - | 71,041 | - | ||||||||||||
Net
loss attributable to Midas Medici Group Holdings, Inc.
|
(299,689 | ) | 68,063 | (670,923 | ) | (57,209 | ) | |||||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||||||
Preferred
stock stated dividends
|
(136,500 | ) | (34,125 | ) | (109,958 | ) | (102,375 | ) | ||||||||
Preferred
stock dividend accretion
|
(279,353 | ) | (116,232 | ) | (203,109 | ) | (201,659 | ) | ||||||||
Net
loss applicable to common stockholders
|
$ | (715,542 | ) | $ | (82,294 | ) | $ | (983,990 | ) | $ | (361,243 | ) | ||||
Net
loss per share applicable to common
|
||||||||||||||||
stockholders
- basic and diluted
|
$ | (1.05 | ) | $ | (0.08 | ) | $ | (0.64 | ) | $ | (0.26 | ) | ||||
Weighted
average common shares
|
||||||||||||||||
outstanding
- basic and diluted
|
679,995 | 1,065,779 | 1,531,736 | 1,372,730 | ||||||||||||
Balance
Sheet Data
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 144,546 | $ | - | $ | 112,335 | $ | 20,140 | ||||||||
Total
assets
|
776,875 | 858,896 | 570,578 | 888,599 | ||||||||||||
Total
liabilities
|
2,292,245 | 1,743,462 | 2,301,867 | 2,134,409 | ||||||||||||
Stockholders'
equity (deficit)
|
(1,515,370 | ) | (884,566 | ) | (1,731,289 | ) | (1,245,809 | ) | ||||||||
Total
liabilities and stockholders' equity (deficit)
|
776,875 | 858,896 | 570,578 | 888,599 |
8
RISK
FACTORS
An
investment in our common stock involves risk. You should
carefully consider the risks described below which are material and inherent in
this offering together with all of the other information included in this
prospectus before making an investment decision with regard to our securities.
The statements contained in or incorporated into this prospectus that are not
historic facts are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
set forth in or implied by forward-looking statements. If any of the following
risks actually occurs, our business, financial condition or results of
operations could be harmed. In that case, the trading price of our common stock
could decline, and you may lose all or part of your investment.
Risks
Associated with Our Business
We
have recently incurred net losses, and we may continue to incur net losses in
the future.
The net
loss of Midas Medici in 2008 was $299,689 and for the nine months ended
September 30, 2009 was $741,964 . Our accumulated deficit as of September 30,
2009 was $1,483,705. We currently have a working capital deficiency of
$1,552,973 as of September 30, 2009. Our net losses in 2008 and 2009 were driven
principally by deteriorated macroeconomic conditions and the fixed cost
nature of our business. More recently, our net losses have been driven
principally by general and administrative, marketing, operating and depreciation
and amortization expenses relating to investing in human capital to support our
newer service offerings and grow our presence in Europe. To try to grow our
revenues and customer base, we plan to continue emphasizing the expansion and
development of our services, which will include increased marketing and
operating expenses. We cannot be certain that by incurring these expenses our
hoped-for revenue growth will occur. Further, even with additional investment we
may never obtain profitability.
We
face intense competition from many competitors that have greater resources than
we do, which could result in price reductions, reduced profitability and loss of
market share.
We
operate in highly competitive markets and generally encounter intense
competition to win contracts and acquire new business. Many of our competitors
are larger and have greater financial, technical, marketing and public relations
resources, larger client bases, and greater brand or name recognition than
we do. Some of our competitors are ICF International, Navigant Consulting,
IBM, and Accenture. We also have numerous smaller competitors, many of which
have narrower service offerings and serve niche markets. Our competitors may be
able to compete more effectively for contracts and offer lower prices to
clients, causing us to lose contracts. In order to compete, we may be
forced to lower the prices at which we offer our services in order to win or
retain contracts, which could lower our margins or cause us to suffer
losses on contracts that we do win. Some of our subcontractors are also
competitors, and some of them may in the future secure positions as prime
contractors, which could deprive us of work we might otherwise have won. Our
competitors also may be able to provide clients with different and greater
capabilities and benefits than we can provide in areas such as technical
qualifications, past performance on relevant contracts, geographic presence,
ability to keep pace with the changing demands of clients and the availability
of key professional personnel. Our competitors also have established or may
establish relationships among themselves or with third parties, including
through mergers and acquisitions, to increase their ability to address client
needs. Accordingly, it is possible that new competitors or alliances among
competitors may emerge. We also may compete with our competitors for the
acquisition of new businesses. Our competitors may also be able to
offer higher prices for attractive acquisition candidates, which could harm our
strategy of growing through selected acquisitions. In addition, our competitors
may engage in activities, whether proper or improper, to gain access to our
proprietary information, to encourage our employees to terminate their
employment with us, to disparage our company, and otherwise to gain competitive
advantages over us. For further information regarding competition, see the
section entitled “Business — Competition.” If we are unable to compete
successfully in the provision of services to clients and for new business, our
revenue and operating margins may decline.
We
may compete with our affiliates for customers and acquisitions
Some of
our directors and officers are affiliated with companies that are also in the
energy services area and may compete with us for acquisitions which may increase
the price we pay for acquisitions. In addition, we may compete with some of
these companies for customers. If we are unable to compete successfully with
these affiliated companies, we may lose customers and may be unable to expand
our customer base which will affect our revenue and operations.
Because
much of our work is performed as short-term projects, research assignments and
consulting engagements, we are exposed to a risk of under-utilizing our
staff.
Utilipoint
performs much of its work under short-term contracts. Even under many of
its longer-term contracts, it performs much of its work under individual
task orders and delivery orders, many of which are awarded on a competitive
basis. If Utilipoint cannot obtain new work in a timely fashion, whether through
new task orders or delivery orders, modifications to existing task orders or
delivery orders, or otherwise, it may not be able to keep its staff profitably
utilized. It is difficult to predict when assignments will be obtained.
Moreover, Utilipoint must manage its staff carefully in order to ensure
that consultants with appropriate qualifications are available when needed
and are utilized to the fullest extent. There can be no assurance
that Utilipoint can profitably manage the utilization of its staff. Staff
under-utilization may hurt our revenue, profit and operating
results.
9
If
we fail to successfully educate existing and potential customers regarding the
benefits of our service offerings or solutions or if the Smart Grid market fails
to develop, our ability to sell our solutions and grow our business could be
limited.
Our
future success depends on commercial acceptance of our clean energy and Smart
Grid solutions and our ability to obtain additional contracts. We anticipate
that revenues related to our consulting services and solutions will constitute a
substantial portion of our revenues for the foreseeable future. The market for
clean energy and Smart Grid solutions is relatively new. In addition, because
the clean energy and Smart Grid solutions sector is rapidly evolving, we cannot
accurately assess the size of the market, and we may have limited insight into
trends that may emerge and affect our business. For example, we may have
difficulty predicting customer needs and developing clean energy and Smart Grid
solutions that address those needs. If the market for our consulting services
and solutions does not continue to develop, our ability to grow our business
could be limited and we may not be able to achieve profitability.
If
we lose key personnel upon whom we depend or fail to attract and retain skilled
employees, we may not be able to manage our operations and meet our strategic
objectives.
We
believe that our success depends on the continued contributions of the members
of our senior management team. Also, we rely on our senior management to
generate business and manage and execute projects and programs successfully. In
addition, the relationships and reputation that many members of our senior
management team have established and maintain with client personnel and industry
professionals contribute to our ability to maintain good client relations and
identify new business opportunities. We are especially dependent on our senior
management team’s experience and expertise to implement our acquisition
strategy. The loss of key personnel could impair our ability to implement our
growth strategy through acquisitions, identify and secure new contracts, to
maintain good client relations, and otherwise manage our business.
Also, we
must continue to hire highly qualified individuals who have technical skills and
who work well with our clients. These employees are in great demand and are
likely to remain a limited resource for the foreseeable future. If we are unable
to recruit and retain a sufficient number of these employees, our ability to
staff engagements and to maintain and grow our business could be limited. In
such a case, we may be unable to win or perform contracts, and we could be
required to engage larger numbers of subcontractor personnel, any of which could
cause a reduction in our revenue, profit and operating results and harm our
reputation. We could even default under one or more contracts for failure to
perform, which could expose us to additional liability and further harm our
reputation and ability to compete for future contracts. In addition, some of our
contracts contain provisions requiring us to commit to staff engagements with
specific personnel the client considers key to our performance under the
contract. In the event we are unable to provide these key personnel or
acceptable substitutes, or otherwise staff our work, the client may reduce the
size and scope of our engagement under a contract or terminate it, and our
revenue and operating results may suffer. In addition, consistent with their
employment agreements, Nana Baffour, our CEO and Johnson Kachidza, our President
and CFO are only required to dedicate at least 65% of their time to of the
Company. Our inability to utilize more than 65% of their time may adversely
affect our ability to execute on our business plan.
We
may not be able to identify suitable acquisition candidates or complete
acquisitions successfully, which may inhibit our rate of growth.
In
addition to organic growth, we intend to pursue growth through the acquisition
of companies or assets that may enable us to expand our project skill-sets and
capabilities, enter new geographic markets, add experienced management and
expand our product and service offerings. However, we may be unable to implement
this growth strategy if we cannot identify suitable acquisition candidates or
reach agreements for potential acquisitions on acceptable terms, or for other
reasons. Our failure to successfully implement our acquisition strategy could
have an adverse effect on other aspects of our business strategy and our
business in general and could inhibit our growth and future profitability. Our
inability to procure adequate financing for acquisitions may adversely impact
our ability to complete the acquisitions successfully or at
all.
In
addition if and to the extent we engage in acquisitions of companies of which
our officers and directors are affiliates, conflicts of interest may
arise in connection with the negotiations of acquisition terms and
conditions which may impact our ability to complete those acquisitions on the
most favorable terms to us.
We
may not be able to successfully integrate acquisitions to realize the full
benefits of the combined business, and may therefore suffer losses or not be as
profitable as planned.
Acquisitions
that we complete may expose us to a number of unanticipated operational or
financial risks, including:
·
|
The
business we acquire may not prove to be profitable and my cause us to
incur additional consolidated losses from
operations;
|
·
|
we
may have difficulty integrating new operations and
systems;
|
10
·
|
key
personnel and customers of the acquired company may terminate their
relationships with the acquired company as a result of the
acquisition;
|
·
|
we
may experience additional financial and accounting challenges and
complexities in areas such as internal control, tax planning and financial
reporting;
|
·
|
we
may assume or be held liable for risks and liabilities (including for
environmental-related costs) as a result of our acquisitions, some of
which we may not discover during our due
diligence;
|
·
|
our
ongoing business may be disrupted or receive insufficient management
attention; and
|
·
|
we
may not be able to realize the cost savings or other financial benefits we
anticipate.
|
Moreover,
to the extent that any acquisition results in goodwill, it will reduce our
tangible net worth, which might have an adverse effect on our ability to obtain
credit. In addition, in the event that we issue shares of our common stock as
part or all of the purchase price, an acquisition will dilute the ownership of
our then-current stockholders.
The
process of completing the integration of acquisitions could cause an
interruption, or loss of, momentum in our activities. The diversion of
management’s attention and any delays or difficulties encountered in connection
with the merger and the integration of the operations of acquisition targets
could have an adverse effect on our business, financial condition or results of
operations.
Our
business may become subject to modified or new government regulation, which may
negatively impact our ability to market our products.
Our
services are not subject to existing federal and state regulations in the U.S.
governing the electric utility industry. In the future, federal, state or local
governmental entities or competitors may seek to change existing regulations or
impose additional regulations. Any modified or new government regulation
applicable to our products or services may negatively impact the implementation,
servicing and marketing of our services and increase our costs.
Our
relations with our contracting partners are important to our business and, if
disrupted, could affect our earnings.
We derive
a portion of our revenue from contracts under which we act as a subcontractor or
from “teaming” arrangements in which we and other contractors jointly bid on
particular contracts, projects or programs. As a subcontractor or team
member, we often lack control over fulfillment of a contract. Poor performance
by the prime contractor could tarnish our reputation, result in reduction of the
amount of our work under or result in termination of that contract, and could
cause us not to obtain future work, even when we are not at fault. We expect to
continue to depend on relationships with other contractors for a portion of our
revenue and profit in the foreseeable future. Moreover, our revenue and
operating results could be materially and adversely affected if any prime
contractor or teammate does not pay our invoices in a timely fashion, chooses to
offer products or services of the type that we provide, teams with other
companies to provide such products or services, or otherwise reduces its
reliance upon us for such products or services.
We
derive significant revenue from contracts awarded through a competitive bidding
process, which can impose substantial costs upon us, and we will lose revenue if
we fail to compete effectively.
We derive
significant revenue and gross profit from utility contracts that are
awarded through a competitive bidding process. We expect that most of the
business we seek in the foreseeable future from these clients will be awarded
through competitive bidding. We will occasionally bid these jobs as the prime
contractor, and occasionally as a sub-contractor. Competitive bidding imposes
substantial costs and presents a number of risks, including:
·
|
the
substantial cost and managerial time and effort that we spend to prepare
bids and proposals for contracts that may or may not be awarded to
us;
|
·
|
the
need to estimate accurately the resources and costs that will be required
to service any contracts we are awarded, sometimes in advance of the final
determination of their full scope;
|
·
|
the
expense and delay that may arise if our competitors protest or challenge
awards made to us pursuant to competitive bidding, and the risk that any
such protest or challenge could result in the resubmission of bids on
modified specifications, and in termination, reduction or modification of
the awarded contracts; and
|
·
|
the
opportunity cost of not bidding on and winning other contracts we might
otherwise pursue.
|
11
To the
extent we engage in competitive bidding and are unable to win particular
contracts, we may incur substantial costs in the bidding process that would
negatively affect our operating results. Even if we win a particular contract
through competitive bidding, our gross profit margins may be depressed or we may
suffer losses as a result of the costs incurred through the bidding process and
the need to lower our prices to overcome competition.
We
may lose money on some contracts if we underestimate the resources we need to
perform under the contract.
We
provide services to clients primarily under three types of contracts:
time-and-materials contracts; fixed-price contracts; and bundled service
agreement contracts. Each of these types of contracts, to differing
degrees, involves the risk that we could underestimate our cost of fulfilling
the contract, which may reduce the profit we earn or lead to a financial loss on
the contract. To the extent our working assumptions prove inaccurate, we may
lose money on the contract, which would adversely affect our operating
results.
For all
three contract types, we bear varying degrees of risk associated with the
assumptions we use to formulate our pricing for the work. To the extent our
working assumptions prove inaccurate, we may lose money on the contract, which
would adversely affect our operating results.
Our
international operations are subject to risks which could harm our business,
operating results and financial condition.
We
currently have international operations and expect to expand these operations
over time. Such international business operations will be subject to a variety
of risks associated with conducting business internationally, including the
following:
·
|
changes
in, or interpretations of, foreign regulations that may adversely affect
our ability to perform services or repatriate profits, if any, to the
United States;
|
·
|
difficulties
in developing, staffing, and managing a large number of foreign operations
as a result of distance, language, and cultural
differences;
|
·
|
economic
or political instability in foreign
countries;
|
·
|
imposition
of limitations on or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries or joint
ventures;
|
·
|
conducting
business in places where business practices and customs are unfamiliar and
unknown;
|
·
|
the
existence of inconsistent laws or
regulations;
|
·
|
the
imposition or increase of investment requirements and other restrictions
or requirements by foreign
governments;
|
·
|
uncertainties
relating to foreign laws and legal
proceedings;
|
·
|
fluctuations
in foreign currency and exchange rates;
and
|
·
|
failure
to comply with U.S. laws (such as the Foreign Corrupt Practices Act), and
local laws prohibiting corrupt payments to government
officials.
|
The
realization of any of the foregoing, could harm our business, operating results
and financial condition.
12
Our
operating results may be affected by fluctuations in foreign currency
exchange rates, which may affect our operating results in U.S. dollar
terms.
A portion
of our revenue arises from our international operations and we anticipate that,
as we grow, our revenues from international operations will increase. Revenues
generated and expenses incurred by our international operations are often
denominated in local currencies. As a result, our consolidated U.S. dollar
financial statements are subject to fluctuations due to changes in exchange
rates as revenues and expenses of our international operations are translated
from local currencies into U.S. dollars. In addition, our financial results are
subject to changes in exchange rates that impact the settlement of transactions.
The Company does not undertake any hedges to protect against adverse foreign
currency exposure.
Our
business depends on providing services to utility companies. In past two years,
economic conditions have deteriorated significantly in the United States and
other countries, and may remain depressed for the foreseeable future. Slowdowns
in the economy may reduce the demand for our services by causing utility
companies to delay or abandon implementation of new systems and technologies. We
cannot predict the timing, strength or duration of any economic slowdown or
subsequent economic recovery. These economic factors could have a material
adverse effect on our financial condition and operating results.
Our
ability to use our net operating loss carryforwards may be subject to limitation
which could result in increased future tax liability for us.
Generally,
a change of more than 50% in the ownership of a company’s stock, by value, over
a three-year period constitutes an ownership change for U.S. federal income tax
purposes. An ownership change may limit a company’s ability to use its net
operating loss carryforwards attributable to the period prior to such change.
The number of shares of our common stock that we issue in this offering may be
sufficient, taking into account prior or future shifts in our ownership over a
three-year period, to cause us to undergo an ownership change. As a result, if
we earn net taxable income, our ability to use our pre-change net operating loss
carryforwards to offset U.S. federal taxable income may become subject to
limitations, which could result in increased future tax liability for
us.
The
failure to raise additional capital could adversely affect
us.
Our
future capital requirements will depend on many factors, including our ability
to successfully generate new and additional business. To the extent that the
funds generated by this offering and the income from ongoing operations are
insufficient to fund our current and future operating requirements, we may need
to raise additional capital through financings or curtail our growth. If we
cannot obtain adequate capital, or can only obtain capital on unfavorable terms,
our business, operating results and financial condition could be adversely
affected.
A portion
of the proceeds of this offering will be used to repay certain outstanding
debt.
We intend
to use up to $982,000 raised in this offering to repay outstanding debt owed to
certain of our affiliates. The proceeds of this offering available to us to
allocate to developing our business is reduced by the amount of the
proceeds used to repay these outstanding debts. To the extent
that we are unable to successfully consummate this offering, we may have to find
alternate means to raise funds to repay such outstanding debt, including through
the issuance of our common stock. To the extent that we are required to issue
additional shares of common stock, in any financing transaction, shareholders
will experience dilution. If we are unable to repay such outstanding debt, the
holders of the debt may commence legal actions against us.
Risks
Associated with this Offering and Our Capital Structure
Investors
will experience immediate and substantial dilution of our common stock's book
value.
Upon the
closing of this offering, investors will incur immediate and substantial
dilution in the per share net tangible book value of their common stock. At
September 30, 2009, after giving pro forma effect to our receipt of the net
proceeds of this offering, we would have a pro forma net tangible book value of
$0.06 per share. Net tangible book value is the amount of our total assets minus
intangible assets and liabilities. This represents a gain in our net tangible
book value of $0.81 per share for the benefit of our current stockholders, and
assuming an offering price to the public of $5.00, dilution of $4.94 or 99% of
the public offering price, for investors in this offering. Investors in this
offering may be subject to increased dilution upon the exercise of existing
outstanding stock options and warrants granted to the representative of the
underwriters.
Insiders
have substantial control over the company, and issuance of shares of Common
Stock pursuant to our incentive plan will dilute your ownership and voting
rights and allow insiders to control the direction of the Company.
The
executive officers of Midas Medici and its directors beneficially owned as
of February 2, 2010 in the aggregate, approximately 1,724,568 shares
of our outstanding common stock, which constitutes approximately 73.5% of our
outstanding shares. Our officers and directors ownership percentage
will increase as a result of any shares issued under our incentive plan under
which we can issue 650,000 shares to our officers, directors, employees and
consultants. Through February 2, 2010 we have granted options to purchase
an aggregate of 472,097 shares of our common stock to our
management.
13
The
executive officers of Midas Medici and its directors have the ability to
exert significant control over our management and affairs requiring stockholder
approval, including approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control and might adversely affect the market price of our common
stock. This concentration of ownership may not be in the best interests of all
of our stockholders.
Liquidity
of shares of our common stock is limited.
Our
shares are not and have not been listed or quoted on any exchange or quotation
system. We have arranged for a market maker to apply to have our common stock
quoted on the OTC Bulletin Board on or about the effective time of the
registration statement of which this prospectus forms a part. There can be
no assurance that such an application for quotation will be approved or that a
regular trading market will develop or that if developed, will be sustained. In
the absence of a trading market, investors may be unable to liquidate their
investment. Even if a market for our common stock does develop, the market price
of our common stock may continue to be highly volatile.
Should
our stock become listed on the OTC Bulletin Board, if we fail to remain current
on our reporting requirements, we could be removed from the OTC Bulletin Board
which would limit the ability of broker-dealers to trade our securities in the
secondary market.
Companies
trading on the OTC Bulletin Board must be reporting issuers under Section 12 of
the Securities Exchange Act of 1934, as amended, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the
OTC Bulletin Board. If we become listed on the OTC Bulletin Board,
but we fail to remain current in our reporting requirements, we could be
removed from the OTC Bulletin Board. As a result, the market liquidity of our
securities could be severely adversely affected by limiting the ability of
broker-dealers to trade our securities and the ability of stockholders to sell
their securities in the secondary market.
Our
common stock could be subject to extreme volatility.
The
trading price of our common stock may be affected by a number of factors,
including events described in the risk factors set forth in this prospectus, as
well as our operating results, financial condition and other events or factors.
In addition to the uncertainties relating to future operating performance and
the profitability of operations, factors such as variations in interim financial
results or various, as yet unpredictable, factors, many of which are beyond our
control, may have a negative effect on the market price of our common stock. In
recent years, broad stock market indices, in general, and smaller capitalization
companies, in particular, have experienced substantial price fluctuations. In a
volatile market, we may experience wide fluctuations in the market price of our
common stock and wide bid-ask spreads. These fluctuations may have a negative
effect on the market price of our common stock. In addition, the
securities market has from time to time experienced significant price and volume
fluctuations that are not related to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect
the market price of our stock.
We
have never paid common stock dividends and have no plans to pay dividends
in the future, as a result our common stock may be less valuable because a
return on an investor’s investment will only occur if our stock price
appreciates.
Holders
of shares of our common stock are entitled to receive such dividends as may be
declared by our board of directors. To date, we have paid no cash dividends on
our shares of common stock and we do not expect to pay cash dividends on our
common stock in the foreseeable future. We intend to retain future earnings, if
any, to provide funds for operations of our business. Therefore, any return
investors in our common stock may have will be in the form of appreciation, if
any, in the market value of their shares of common stock. There can
be no assurance that shares of our common stock will appreciate in
value or even maintain the price at which our stockholders have purchased their
shares.
Our
common stock may be subject to “penny stock” rules of the Securities and
Exchange Commission, which may make it more difficult for stockholders to sell
our common stock.
Our
common stock may be subject to the “penny stock” rules adopted under Section
15(g) of the Exchange Act. The penny stock rules generally apply to companies
whose common stock is not listed on a national securities exchange and trades at
less than $4.00 per share, other than companies that have had average revenue of
at least $6,000,000 for the last three years or that have tangible net worth of
at least $5,000,000 ($2,000,000 if the company has been operating for three or
more years). These rules require, among other things, that brokers who trade
penny stock to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade penny stocks because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. If we are subject to the
penny stock rules for any significant period, it could have an adverse effect on
the market liquidity of our stock and investors may find it more difficult to
dispose of our securities.
The
rights of the holders of common stock may be impaired by the potential issuance
of preferred stock.
Our
certificate of incorporation gives our board of directors the right to create
new series of preferred stock. As a result, the board of directors may, without
stockholder approval, issue preferred stock with voting, dividend, conversion,
liquidation or other rights which could adversely affect the voting power and
equity interest of the holders of common stock. Preferred stock, which could be
issued with the right to more than one vote per share, could be utilized as a
method of discouraging, delaying or preventing a change of control. The possible
impact on takeover attempts could adversely affect the price of our common
stock. Although we have no present intention to issue any shares of preferred
stock or to create any new series of preferred stock, we may issue such shares
in the future.
14
We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our stockholders.
If our
resources are insufficient to satisfy our cash requirements, we may seek to sell
additional equity or debt securities or obtain a credit facility. The sale of
additional equity securities could result in additional dilution to our
stockholders. The incurrence of indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that
would restrict our operations. Financing may not be available in
amounts and on terms acceptable to us, or at all. In addition, the successful
execution of our business plan requires significant cash resources,
including cash for investments and acquisition. Changes in business
conditions and future developments could also increase our cash requirements. To
the extent we are unable to obtain external financing, we will not be able
to execute our business plan effectively. Although we recently procured a
working capital line of credit, our ability to draw upon that line is subject to
our compliance with covenants such as net worth, operating profits and adequate
accounts receivable balances. Further, this line of credit is secured by all
our assets and a default under the Revolving Credit Facility
agreement could result in the loss of our assets. In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in further dilution to
our stockholders.
The
implementation of our stock-based incentive plan may dilute your percentage
ownership interest and may also result in downward pressure on the price of our
stock.
Our board
has adopted a stock-based incentive plan. Under the incentive plan, the Company
can grant a maximum of up to 650,000 shares to our officers, directors,
employees and consultants. Shareholders would experience a dilution in
ownership interest assuming the maximum issuance of 650,000 shares from stock
options or awards of restricted stock under the plan. In addition,
the existence of a significant amount of stock and stock options that are
issuable under our incentive plan may be perceived by the market as having a
dilutive effect, which could lead to a decrease in the price of our common
stock.
We
have significant related party transactions, which may be viewed unfavorably by
investors.
We have
consummated several transactions with affiliated parties (See section entitled
“Certain Relationships and Related Transactions”) Investors may view such
transactions unfavorably and may be reluctant to purchase our stock, which could
negatively affect both the price and market for our common
stock.
In
connection with an evaluation of our disclosure controls and procedures required
by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of
1934, our Chief Executive Officer and Chief Financial Officer concluded that, as
of September 30, 2009, our disclosure controls and procedures were not effective
in ensuring that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the requisite time periods.
Based on
an evaluation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended)
required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of September 30,
2009, our Chief Executive Officer and Chief Financial Officer have concluded
that our disclosure controls and procedures were not effective in ensuring that
information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Commission's rules
and forms. Our Chief Executive Officer and Chief Financial Officer
also concluded that, as of September 30, 2009, our disclosure controls and
procedures were not effective in ensuring that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure. If we fail to maintain effective internal control over
financial reporting and effective disclosure controls and procedures, we may not
be able to accurately report our financial results or prevent
fraud.
15
DETERMINATION
OF OFFERING PRICE
The
offering price of our shares was determined by our management after consultation
with our underwriters and is based upon consideration of various factors,
including our history and prospects, the background of our management and
current conditions in the securities markets. The price of our shares does not
bear any relationship to our assets, book value, net worth or other economic or
recognized criteria of value. In no event should the offering price of our
shares be regarded as an indicator of any future market price of our
securities.
SPECIAL
NOTE REGARDING FORWARD LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements other
than statements of historical fact contained in this prospectus constitute
forward-looking statements. Such forward-looking statements include statements
regarding, among other things, (a) our projected sales and profitability, (b)
our growth strategies, (c) anticipated trends in our industry, (d) our future
financing plans, and (e) our anticipated needs for working capital.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies, and expectations, are generally identifiable by use of the
words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend,” or “project” or the negative of these words or other variations on
these words or similar terminology. This information may involve known and
unknown risks, uncertainties, and other factors that may cause our actual
results, performance, or achievements to be materially different from the future
results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under “Prospectus
Summary,” “Management's Discussion and Analysis of Financial Condition and
Results of Operations” and “Description of Business,” as well as in this
prospectus generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under “Risk Factors” and
matters described in this prospectus generally. This prospectus may contain
market data related to our business, which may have been included in articles
published by independent industry sources. We are responsible for the accuracy
and completeness of the historical information contained in these market data as
of the date of this prospectus. However, these market data also includes
projections that are based on a number of assumptions. If any one or more of
these assumptions turns out to be incorrect, actual results may differ
materially from the projections based on these assumptions. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this prospectus will in fact occur. In addition to the
information expressly required to be included in this filing, we will provide
such further material information, if any, as may be necessary to make the
required statements, in light of the circumstances under which they are made,
not misleading.
Each
forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and our
business made elsewhere in this prospectus as well as other pubic reports which
may be filed with the SEC. You should not place undue reliance on any
forward-looking statement as a prediction of actual results or developments. We
are not obligated to update or revise any forward-looking statement contained in
this prospectus to reflect new events or circumstances, unless and to the extent
required by applicable law.
16
USE
OF PROCEEDS
Based on
an assumed $5.00 initial offering price per share, we estimate the gross
proceeds from the offering, prior to deducting underwriting discounts and
commissions and the estimated offering expenses payable by us, will be
approximately $2,500,000 (approximately $2,875,000 if the over-allotment
option granted to the underwriters is exercised in full). Pending the use of the
net proceeds, we will invest the proceeds in short-term, investment-grade,
interest-bearing securities.
Without
Over-
|
Over-Allotment
|
|||||||||||||||
Allotment
|
Option
|
|||||||||||||||
Option
|
Exercised
|
|||||||||||||||
Gross
proceeds
|
$ | 2,500,000 | 100.0 | % | $ | 2,875,000 | 100.0 | % | ||||||||
Offering
expenses (1)
|
589,313 | 23.6 | % | 623,063 | 21.7 | % | ||||||||||
Net
proceeds
|
$ | 1,910,687 | 76.4 | % | $ | 2,251,937 | 78.3 | % | ||||||||
Use
of net proceeds
|
||||||||||||||||
Marketing
and infrastructure
|
$ | 250,000 | 10.0 | % | $ | 350,000 | 12.2 | % | ||||||||
Investment
in strategic partnerships
|
200,000 | 8.0 | % | 300,000 | 10.4 | % | ||||||||||
Website
and databases upgrade
|
150,000 | 6.0 | % | 250,000 | 8.7 | % | ||||||||||
Repay
subordinated debt, accrued unpaid dividends and management fees
(2)
|
981,793 | 39.3 | % | 981,793 | 34.1 | % | ||||||||||
Working
capital, including acquisitions and transaction costs
(3)
|
328,894 | 13.2 | % | 370,144 | 12.9 | % | ||||||||||
Total
|
$ | 1,910,687 | 76.4 | % | $ | 2,251,937 | 78.3 | % |
(1)
|
Includes
underwriting discount of 8%, underwriting non-accountable expense
allowance of 1% and other legal, accounting and consulting agreement
expenses.
|
(2)
|
Includes
repayment of up to $981,793 of the principal amount plus accrued interest
on the following: (A) (i) a 12% $447,106 note due on
03/31/2010; (ii) a 10% $62,500 note issued by Knox Lawrence International,
LLC. to Utilipoint which is due on 12/31/2013; (iii) a 10%
$10,000 note issued by Knox Lawrence International, LLC. to
Utilipoint which is due on 01/15/2014; (iv) a 4% $5,000 note due on
05/04/2010; (v) a 4% $16,000 note due on 01/30/2010; (vi) a 10%
$7,500 note due on 01/15/2014; (vii) a $21,309 variable interest rate note
issued by Robert Bellemare to Utilipoint which was due on
08/02/2009; (viii) a 10% $7,500 note issued by Robert Bellemare which is
due on 01/15/2014, (ix) $3,722 on 4% note payable which was due on
06/02/2009, and (x) a 5% $108,969 promissory note issued by
the Intelligent Project to KLI IP Holding, Inc. which is due on 6/30/2012;
Notes with due dates in June and August 2009 have been extended
through 2010; (B) accrued unpaid dividends in the amount of $178,208 which
represents dividends on Series A preferred stock of Utilipoint issued to
UTP International, LLC paid by Knox Lawrence International,
LLC on behalf of Utilipoint and (C) unpaid management fees to Knox
Lawrence International, LLC in the amount of approximately $113,978.
Of the debts and obligations that is being repaid out of proceeds
approximately $500,000 is to certain of our officers and
directors.
Certain
of our affiliates may convert outstanding debt of up to $250,000 in this
offering, pursuant to which they will purchase shares of our common stock
at the public offering price, which will constitute part of the 250,000
shares to be sold in this offering. In the event that our insiders
convert their outstanding debt into shares, such outstanding debt will be
reduced and/or cancelled, as the case may be, and we will not receive the
proceeds of the issuance of such shares.
|
(3)
|
Includes,
salaries, administrative expenses and cost associated with being a
reporting company. In addition we may utilize a portion of the
proceeds allocated for working capital to pay acquisition and transaction
costs including costs associated with identifying potential acquisition
targets and initial due diligence costs. Such costs will not include
amounts related to payment for the acquisitions, but will only cover costs
related to investigating such acquisitions. Our management has
identified the following types of businesses for possible acquisition: (i)
engineering companies that provide enabling solutions to the Smart Grid
infrastructure; (ii) technology companies that provide infrastructure
solutions; (iii) companies that facilitate financing of energy efficiency
initiatives for consumers and commercial enterprises; and (iv) other
companies or Smart Grid-related products and services aimed at commercial
and industrial customers and consumers. Currently we have no agreements
for any acquisitions. There can be no assurance that we will be
able to consummate any strategic acquisitions, or if we are able to do so,
that any one or more of the acquisitions will prove to be profitable or
otherwise beneficial to our
company.
|
In the
event that we locate acquisition candidates we deem to be attractive, we may be
required to raise additional proceeds from the sale of debt or equity securities
in order to finance such acquisitions. There can be no assurance that
we will be successful in raising additional capital or that the terms offered
will be attractive to the Company and its stockholders.
DIVIDEND
POLICY
We have
never paid cash dividends or distributions to our common stock owners. We do not
expect to pay cash dividends on our common stock, but instead, intend to utilize
available cash to support the development and expansion of our business. Any
future determination relating to our dividend policy will be made at the
discretion of our Board of Directors and will depend on a number of factors,
including but not limited to, future operating results, capital requirements,
our financial condition and the terms of any credit facility or other financing
arrangements we may obtain or enter into, future prospects and other factors our
Board of Directors may deem relevant at the time such payment is considered.
There is no assurance that we will be able, or that our Board of Directors will
desire, to pay dividends in the future or, if dividends are paid, in what
amount.
CAPITALIZATION
The
following table sets forth our capitalization as of September 30, 2009
(unaudited):
·
|
on
an actual basis; and
|
·
|
on
a pro forma as adjusted basis giving effect to the sale of 500,000 shares
of common stock (excluding the 75,000 shares which the
underwriter has the option to purchase to cover over-allotments, if any)
in this offering at an assumed public offering price of $5.00, and
after deducting underwriting discounts and commission and
additional offering expenses estimated at
$589,313
|
You
should read this table in conjunction with “Use of Proceeds,” “Summary
Historical Consolidated Financial Data,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our consolidated financial
statements and related notes included in this
prospectus.
Midas
Medici Group Holdings,
Inc. |
Pro
Forma Offering |
|||||||
Cash
and cash equivalents
|
$ | 112,335 | $ | 1,041,229 | ||||
Revolving
Credit Facility
|
$ | 53,764 | $ | 53,764 | ||||
Long-term
debt
|
689,607 | - | ||||||
Common
stock
|
2,736 | 3,236 | ||||||
Additional
paid-in capital
|
(187,719 | ) | 1,722,468 | |||||
Treasury
stock
|
(40 | ) | (40 | ) | ||||
Accumulated
other comprehensive income
|
8,480 | 8,480 | ||||||
Accumulated
deficit
|
(1,483,705 | ) | (1,483,705 | ) | ||||
Non-controlling
interest
|
(71,041 | ) | (71,041 | ) | ||||
Total
Capitalization
|
$ | (987,918 | ) | $ | 233,162 |
17
DILUTION
Purchasers
of common stock in this offering will be diluted to the extent of the difference
between the public offering price per share and the net tangible book value per
share of our common stock immediately after this offering. Net tangible book
value dilution per share represents the difference between the amount per share
paid by purchasers of common stock in this offering and the pro forma, adjusted
net tangible book value (deficit) per share of common stock immediately
after completion of this offering. Pro forma net tangible book value (deficit)
per share as of a specified date is determined by dividing our tangible book
value (deficit) (total tangible assets less total liabilities) by the number of
outstanding shares of common stock at such date.
After
giving effect to our reverse merger with Utilipoint and the issuance of
1,348,516 shares of our common stock to the Utilipoint shareholders, our net
tangible book value as of September 30, 2009, was $(1,731,289), or $(0.75) per
share of common stock.
After
giving effect to our sale of the 500,000 shares of common stock offered by this
prospectus (based upon a public offering price of $5.00 per share, after
deducting the underwriting discount and our estimated offering expenses), our
pro forma net tangible book value as of September 30, 2009, would have been
$179,398, or $0.06 per share of common stock. This represents an immediate
increase in pro forma net tangible book value to existing stockholders of $0.81
per share, and an immediate dilution to new investors of $4.94 per share, or 99%
of the public offering price of the shares offered in this offering. The
following table illustrates the per share dilution:
Public
offering price per share
|
$
|
5.00
|
||||||
Tangible
book value (deficit) per share as of September 30,
2009
|
$
|
(0.75
|
)
|
|||||
Increase
in pro forma net tangible book value (deficit) per share attributable to
new investors in this offering
|
0.81
|
|||||||
Pro
forma net tangible book value per share as of September 30, 2009 after
this offering
|
0.06
|
|||||||
Pro
forma net tangible book value dilution per share to new investors in this
offering
|
$
|
4.94
|
||||||
The
following table sets forth, on an as adjusted basis as of September 30,
2009, the difference between the number of shares of common stock purchased from
us, the total cash consideration paid, and the average price per share paid by
our existing stockholders and by new public investors before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us, using an assumed public offering price of $5.00 per share of common stock:
Average
|
||||||||||||||||||||
Shares Purchased
|
Total Cash
Consideration
|
Price
Per
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Share
|
||||||||||||||||
Existing
stockholders
|
2,310,516 | 82% | $ | 397,153 | 14% | $ | 0.17 | |||||||||||||
New
investors from public offering
|
500,000 | 18% | 2,500,000 | 86% | $ | 5.00 | ||||||||||||||
Total
|
2,810,516 | 100% | $ | 2,897,153 | 100% | |||||||||||||||
The total
consideration amount for shares of common stock held by our existing
stockholders includes total cash paid for our outstanding shares of common stock
as of September 30, 2009. If the underwriters’ over-allotment option
of 75,000 shares of common stock is exercised in full, the number of shares held
by existing stockholders will be reduced to 80% of the total number of shares to
be outstanding after this offering; and the number of shares held by the new
investors will be increased to 575,000 shares, or 20%, of the total number of
shares of common stock outstanding after this offering.
The
discussion and tables above is based on (i) 2,310,516 shares of common
stock issued and outstanding as of September 30, 2009, and (ii) 500,000 shares
of common stock issued in the public offering (excluding the underwriter’s
over-allotment option of up to 75,000 shares). In addition, we may
choose to raise additional capital due to market conditions or strategic
considerations even if we believe we have sufficient funds for our current or
future operating plans. To the extent that additional capital is raised through
the sale of equity or convertible debt securities, the issuance of these
securities could result in further dilution to our
stockholders.
18
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The
following unaudited condensed consolidated pro forma financial data of Midas
Medici Group Holdings, Inc. were derived from the historical consolidated
financial statements of Midas Medici and should be read in conjunction with the
historical financial statements and the notes thereto, included elsewhere in
this Prospectus. Included are the unaudited pro forma condensed
consolidated balance sheet of Midas Medici as of September 30, 2009
pro forma for the additional shares issued in this offering and as presented in
the prospectus.
On August
21, 2009, Midas Medici completed a reverse merger with privately held
Utilipoint, a New Mexico corporation which resulted in Midas Medici being the
“legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was
effected pursuant to a Merger Agreement dated August 10, 2009 by and among the
Company, Utilipoint and Utilipoint Acquisition Company. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which
represents 100% of the then outstanding shares). This includes 21,523 Utilipoint
Series A Preferred Stock that were converted to 687,922 Midas Medici common
shares. Further, all outstanding Utilipoint options were exchanged for 172,597
Midas Medici options in accordance with the Midas Medici stock option program,
adopted on July 27, 2009. Immediately after the closing of the acquisition and
as of September 30, 2009, an aggregate of 2,310,516 shares of common stock were
outstanding. Hence, the 1,348,516 shares represented approximately 58% of the
outstanding shares of Midas Medici. The shares of common stock issued in
connection with the reverse merger were not registered with the Securities and
Exchange Commission and are considered to be restricted securities.
The
unaudited pro forma condensed consolidated balance sheet as of September 30,
2009 gives effect to the following transactions as if:
•
|
the
issuance of 500,000 shares of our common stock in this offering at an
assumed price of $5.00 per share shown on the cover of this
prospectus; and
|
|
•
|
the
use of the proceeds we will receive as set forth in the “Use of
Proceeds” section of this
prospectus.
|
The
unaudited pro forma condensed consolidated financial
statements data is provided for illustrative purposes only. They do
not purport to represent what the Company’s financial position would have
been had the transaction actually occurred as of the dates indicated, and they
do not purport to project the Company’s financial position.
19
PRO
FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
AS OF
SEPTEMBER 30, 2009
Midas
Medici
Group
Holdings, Inc.
and
Subsidiaries (Formally Utilipoint International, Inc. and
Subsidiaries)
|
Offering
Adjustments
|
Note(1)
|
Pro
Forma Midas Medici Group Holdings, Inc. and Subsidiaries
Offering
|
||||||||||
ASSETS
|
|||||||||||||
Current
assets:
|
|||||||||||||
Cash
and cash equivalents
|
$ | 112,335 | $ | 928,894 |
(A)
|
$ | 1,041,229 | ||||||
Accounts
receivable, net
|
408,605 | - | 408,605 | ||||||||||
Prepaid
expenses and other current assets
|
23,083 | - | 23,083 | ||||||||||
Total
current assets
|
544,023 | 928,894 | 1,472,917 | ||||||||||
Property
and equipment, net
|
23,603 | - | 23,603 | ||||||||||
Other
assets
|
2,952 | - | 2,952 | ||||||||||
Total
assets
|
$ | 570,578 | $ | 928,894 | $ | 1,499,472 | |||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||||||||||||
Current
liabilities:
|
|||||||||||||
Accounts
payable
|
$ | 578,803 | $ | - | $ | 578,803 | |||||||
Accrued
expenses
|
464,591 | - | 464,591 | ||||||||||
Revolving
credit facility
|
53,764 | - | 53,764 | ||||||||||
Deferred
revenue
|
180,455 | - | 180,455 | ||||||||||
Current
portion of long-term debt
|
493,138 | (493,138 | ) |
(B)
|
- | ||||||||
Capital
lease obligations - current portion
|
13,493 | - | 13,493 | ||||||||||
Preferred
stock dividends payable - stated
|
178,208 | (178,208 | ) |
(B)
|
- | ||||||||
Management
fees payable
|
113,978 | (113,978 | ) |
(B)
|
- | ||||||||
Other
current liabilities
|
20,566 | - | 20,566 | ||||||||||
Total
current liabilities
|
2,096,996 | (785,324 | ) | 1,311,672 | |||||||||
Long-term
debt, less current portion
|
196,469 | (196,469 | ) |
(B)
|
- | ||||||||
Capital
lease obligations, less current portion
|
8,402 | - | 8,402 | ||||||||||
Total
non-current liabilities
|
204,871 | (196,469 | ) | 8,402 | |||||||||
Total
liabilities
|
2,301,867 | (981,793 | ) | 1,320,074 | |||||||||
Stockholders'
equity (deficit):
|
|||||||||||||
Common
stock
|
2,736 | 500 |
(C)
|
3,236 | |||||||||
Additional
paid-in capital
|
(187,719 | ) | 1,910,187 |
(C)
|
1,722,468 | ||||||||
Treasury
stock
|
(40 | ) | - | (40 | ) | ||||||||
Accumulated
other comprehensive income
|
8,480 | - | 8,480 | ||||||||||
Accumulated
deficit
|
(1,483,705 | ) | - | (1,483,705 | ) | ||||||||
Total
stockholders' equity (deficit) of Midas Medici
|
|||||||||||||
Group
Holdings, Inc.
|
(1,660,248 | ) | 1,910,687 | 250,439 | |||||||||
Non-controlling
interest
|
(71,041 | ) | - | (71,041 | ) | ||||||||
Total
stockholders' equity (deficit)
|
(1,731,289 | ) | 1,910,687 | 179,398 | |||||||||
Total
liabilities and stockholders' equity (deficit)
|
$ | 570,578 | $ | 928,894 | $ | 1,499,472 |
See Notes
to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
20
Note
to Pro Forma Condensed Consolidated Balance Sheet
(Unaudited)
Note 1 — Adjustments
to Pro Forma Condensed Consolidated Balance Sheet
The
following adjustments were applied to the pro forma condensed consolidated
balance sheet:
(A)
|
Adjustment
to reflect the estimated net proceeds from the offering discussed in this
prospectus. Amount includes gross proceeds of $2,500,000 less estimated
fees associated with the transaction of $589,313 and $981,793 of
proceeds used to pay certain
indebtedness.
|
(B)
|
Adjustment
to remove management fees payable, subordinated debt and accrued unpaid
preferred stock dividends.
|
(C)
|
Adjustments
to “Additional Paid-in Capital” to reflect amounts associated with this
offering.
|
21
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We urge
you to read the following discussion in conjunction with our consolidated
financial statements and the notes thereto beginning on page F-1. This
discussion may contain forward-looking statements that involve substantial risks
and uncertainties. Our actual results, performance or achievements could differ
materially from those expressed or implied by the forward-looking statements as
a result of a number of factors, including, but not limited to risks and
uncertainties discussed under the heading “Risk Factors” beginning on page 9 of
this prospectus, and in our other filings with the SEC. See “Special Note
Regarding Forward Looking Statements”.
Midas
Medici Group Holdings, Inc.
Overview
We were
incorporated in the State of Delaware on October 30, 2006 under the name Mondo
Acquisition I, Inc. We were formed as a vehicle to pursue a business combination
through the acquisition of, or merger with, an operating business. On May 15,
2009, we, Mondo Management Corp., our then sole shareholder, and Midas Medici
Group, Inc. entered into a Purchase Agreement. Pursuant to
the Purchase Agreement, Mondo Management Corp. sold to Midas Medici
Group, Inc. 1,000,000 previously issued and
outstanding shares of the Company's
restricted common stock, comprising 100%
of the issued and
outstanding capital stock of the Company. The
execution of the Purchase Agreement resulted in a change in control of the
Company, both in its shareholding and management. Effective May 22, 2009, we
changed our name to Midas Medici Group Holdings, Inc.
Prior to
its acquisition of Utilipoint International, Inc., the Company was a
“shell company” based on its business activities. Under SEC rule 12b-2 under the
Securities Act of 1933, as amended (the “Securities Act”), the Company also
qualified as a “shell company,” because it had no or nominal assets (other than
cash) and no or nominal operations.
With the acquisition of Utilipoint on August 21, 2009, the merger was
accounted for as a reverse merger and recapitalization which resulted in Midas
Medici being the "legal acquirer" and Utilipoint the "accounting
acquirer".
Utilipoint
provides consulting services and proprietary research to its clients using
multi-disciplinary teams with deep subject matter expertise, analytical
methodologies, primary research and technology-enabled tools. As of February 2, 2010 , Utilipoint had 19
employees. More than 50% of Utilipoint’ s professional staff hold
post-graduate degrees in such diverse fields as economics, engineering, business
administration, information technology, law, life sciences and public policy.
Utilipoint’s senior managers have considerable industry and project management
experience and an average tenure of more than 20 years in the industry. We
believe this diverse pool of intellectual capital enables us to provide creative
solutions to our clients’ most pressing problems.
Utilipoint
is headquartered in Albuquerque, New Mexico, with two domestic regional offices
in Tulsa, Oklahoma and Sugar Land, Texas. It maintains international operations
through its office in Brno, Czech Republic.
22
Recent
Developments
Revolving
Loan Agreement
On
October 14, 2009, Midas Medici and UtiliPoint, entered into a Revolving Loan
Agreement with Proficio Bank. Pursuant to the terms of the Loan Agreement, the
Lender agreed to lend us up to $500,000, which amounts will be evidenced by a
Senior Secured Revolving Promissory Note.
The Loan
matures on October 14, 2010, unless earlier accelerated upon the occurrence of
an event of default, as such term is defined in the Loan Agreement. Interest on
the Loan is payable monthly in arrears commencing on November 1, 2009, at a rate
which is equal to the published Wall Street
Journal prime rate plus 2.5%, or a minimum of 6.5%. In the
event of default, as such term is defined in the Loan Agreement, the interest
rate shall bear additional interest of 3%. Pursuant to the terms of
the Loan Agreement, events of default include: (i) our failure to make any
payments due under the Loan within 10 days of the due date, (ii) Our failure to
make any required payments on any material obligation for money borrowed or the
Company’s failure to pay its debts as they become due, unless the debts are the
subject of a bona fide dispute; (iii) default under the security agreement or
any other agreement we execute in favor of Proficio; (iv) our breach
of any representation or warranty under the Loan Agreement; (v) our failure to
perform or observe any covenants under the Agreement, which failure continues
for 10 days after written notice from Proficio; (vi) our assignment for the
benefit of our creditors, or taking action with respect to the appointment of a
receiver or custodian for the Company or a substantial part of its business or
the filing of any proceeding under any bankruptcy or similar law or if any such
petition or proceeding has been commenced against us, such petition is not
dismissed within 60 days; (vii) our concealment or removing any of our assets
with the intent to defraud our creditors or making a fraudulent
transfer or while insolvent, permitting a creditor to obtain a lien
on our property, which is not vacated within 30 days.
The Loan
is secured by all of our property, including, all our accounts, inventory,
furniture, fixtures, equipment, leasehold improvements, chattel paper and
general intangibles and all proceeds thereof.
In
connection with the Loan Agreement, we paid an origination fee of 2% or $10,000.
The proceeds of the Loan are to be utilized solely for working capital
purposes. At the closing of the Loan Agreement, we drew $150,000
of the available line of credit from Pacifico Bank.
In
connection with the Loan, in addition to the Loan Agreement, we entered into a
Security Agreement with Proficio and the holders of the senior subordinate
debentures issued by Utilipoint entered into a Subordination and Standstill
Agreement. In addition, Knox Lawrence International, LLC (“KLI”)
issued a comfort letter to Proficio Bank. Nana Baffour, the CEO and
Co-Executive Chairman of Midas Medici and Johnson Kachidza, the President,
CFO and Co-Executive Chairman of Midas Medici are key shareholders of
KLI.
Agreement
with Forbes Magazine
On
October 2, 2009 Utilipoint and Forbes Magazine entered into an agreement whereby
Utilipoint would produce a series of video and audio interviews with Energy and
Utility industry senior executives and policy makers, to be called “The Great
Transformers”. The Great Transformers interviews would be posted on the Forbes
Custom and Utilipoint websites as well as be part of the Special Advertising
section in the March 15, 2010 edition of Forbes Magazine. The videos and
podcasts of Great Transformers interview can be viewed and listened to on the
Utilipoint and Forbes websites at www.utilipoint.com/greattransformers
and www.forbescustom.com
respectively.
Results
of Operations
The
following discussion highlights results from our comparison of consolidated
statements of operations for the periods indicated.
Three
months ended September 30, 2009 compared to three months ended September 30,
2008 (dollars in thousands)
Net revenues. Net revenues
for the three months ended September 30, 2009 were $837.4, compared to $1,055.6
for the three months ended September 30, 2008. The decrease in net revenues was
primarily due to the Company's clients and target customers cutting budgets for
discretionary spending that account for the Company's core revenues
sources.
Cost of services. Cost of
services for the three months ended September 30, 2009 were $506.2, or 60.4% of
net revenue, compared to $599.6 or 56.8% of net revenue, for the three months
ended September 30, 2008. The slight decrease in our margins, as a result of
higher cost of services as a percentage of net revenues, was primarily due to
variability in the type of services we provided.
Selling, general and administrative
expenses. Selling, general and administrative expenses for the three
months ended September 30, 2009 were $820.5, compared to $493.7 for the three
months ended September 30, 2008. Selling, general and administrative expenses
increased significantly primarily due to expenses related to the preparation and
filing of the registration statement as filed on August 24, 2009 and stock-based
compensation charges for the options granted under the Midas Medici Group
Holdings Stock Options Plan ("MMGH Plan") of $196.4.
Operating loss. For the three
months ended September 30, 2009, losses from operations totaled $493.6, compared
to an operating loss of $42.1 for the three months ended September 30, 2008.
Loss from operations increased primarily due to reduced net revenues combined
with one time acquisition (of Utilipoint) and stock-based compensation
related expenses.
Interest and tax expense. For
the three months ended September 30, 2009, interest expense was $19.8, compared
to $19.9 for the three months ended September 30, 2008. Tax provisions were not
material for either period.
23
Nine
Months ended September 30, 2009 compared to Nine Months ended September 30, 2008
(dollars in thousands)
Net revenues. Net revenues
for the nine months ended September 30, 2009 was $2,567.0, compared to $2,826.7
for the nine months ended September 30, 2008. This decrease was due primarily to
macroeconomic market conditions, negatively impacting clients' budgets for
research and consulting engagements.
Cost of services. Cost of
services for the nine months ended September 30, 2009 were $1,445.2, or 56.3% of
net revenue, compared to $1,485.0 or 52.5%, for the nine months ended September
30, 2008. This 2.7% decrease in dollar amount cost of services associated
with our net revenues was as a result of cost cutting during the reporting
period.
Selling, general and administrative
expenses. Selling, general and administrative expenses for the nine
months ended September 30, 2009 were $1,785.0, compared to $1,338.7 for the nine
months ended September 30, 2008. Selling, general and administrative expenses
increased significantly primarily due to expenses related to the preparation and
filing of the registration statement as filed on August 24, 2009 and stock-based
compensation charges for the options granted under the MMGH Plan, of
$196.4.
Operating loss. For the nine
months ended September 30, 2009, losses from operations totaled $677.0, compared
to an operating loss of $9.2 for the nine months ended September 30, 2008.
Earnings from operations decreased due to one-time selling, general and
administrative expenses related to the preparation and filing of our
registration statement and stock-based compensation expense and decreased
in net revenues and increased cost of services as a percentage of
net revenues that resulted from lower than historical fixed staff
utilization.
Interest and tax expense. For
the nine months ended September 30, 2009, interest expense was $62.9, compared
to $49.3 for the nine months ended September 30, 2008. Tax provisions were not
material for either period.
Liquidity
and Capital Resources
At
September 30, 2009, we had cash and cash equivalents of $112,335 and
working capital deficiency of $1,552,973.
On
October 14, 2009, Midas Medici Group Holdings, Inc. and UtiliPoint entered into
a Revolving Loan Agreement with Proficio Bank. Pursuant to the terms of the Loan
Agreement, the Lender agreed to loan up to $500,000 to the Company which amounts
will be evidenced by a Senior Secured Revolving Promissory Note. At the closing
of the Loan Agreement, the Company issued a senior secured revolving promissory
note to Proficio Bank in the amount of $150,000.
Management
believes the Company’s Line of Credit coupled with improved profitability
resulting from the further implementation of management’s strategic initiatives
will enable the Company to operate its business in a sustainable manner through
December 31, 2010.
Utilipoint
International, Inc.
Overview
Utilipoint
International, Inc. is our wholly-owned subsidiary. Utilipoint provides custom
research and management, technology and policy consulting services to utilities,
investors, regulators, and energy industry service providers both domestically
and internationally. We help our clients conceive, develop, implement and
improve Smart Grid and other energy solutions that address the efficiency,
reliability and security of the generation, transmission, and distribution of
electricity to end users. Through our wholly-owned subsidiary, Utilipoint, we
provide our services along seven practice areas: (1) Smart Meter Deployment; (2)
Energy Investments & Business Planning; (3) CommodityPoint; (4)
Meter-to-Cash; (5) Pricing & Demand Response; (6) Public & Regulatory
Issues Management; and (7) Intelligent Project. We believe increased
demand for electricity, infrastructure under-investment and grid deterioration
and an evolving regulatory environment have created opportunities for
us.
We served
132 clients during fiscal year 2008. We concentrate our business activity
throughout the United States and Canada, and Europe and also serve select
clients in Asia, South America, Africa and the Middle East. Our clients include
utilities, investors, regulators, and energy industry service providers such as
vendors to utilities, including companies such as General Electric, Electronic
Data Systems (EDS), SAP, Eskom Holdings, Union Fonesa SA, ICAP Energy,
International Power, Alliance Data and others . No single client represented
more than 10.0% of our total net revenue in 2008. Revenue contribution from our
63 new clients was approximately $502,700 in 2008.
24
Acquisitions
A key
element of our growth strategy is to pursue acquisitions. We plan to continue to
acquire businesses as opportunities arise. We expect future acquisitions to also
be accounted for as purchases and therefore result in recording goodwill and
other intangible assets. We expect to raise additional funds and incur
additional debt for future acquisitions and, in some cases, to use our stock as
acquisition consideration in addition to, or in lieu of, cash. Any issuance of
stock may have a dilutive effect on our stock outstanding.
Intelligent
Project.
On July
1, 2009, Utilipoint, acquired 60% of the membership interest of the
Intelligent Project, LLC, a research and advisory services firm addressing the
challenges that utilities face in advancing and solving electricity consumers’
needs related to the Smart Grid. As consideration for the transaction,
Utilipoint entered into a capital commitment agreement with Intelligent Project
for an amount up to $200,000 to support its initial financing. Utilipoint also
committed to provide certain management services to Intelligent Project in
exchange for reasonable compensation. Further, the existing members of
Intelligent Project will provide services to Utilipoint in exchange for options
to purchase an aggregate of 17,579 shares of the common stock of Midas
Medici that are fully-vested on the date of grant. Since inception, KLI has
financed the operations of the Intelligent Project and has to date provided
funds in the aggregate of $108,969 evidenced by a promissory note issued by the
Intelligent Project to KLI IP Holding, Inc. on June 30, 2009 which matures
on June 30, 2012. The note will be repaid out of the proceeds of this
offering.
Utilipoint
On August
21, 2009, Midas Medici completed a reverse merger transaction with Utilipoint
International, Inc. (“Utilipoint”), a New Mexico Corporation, which resulted in
Midas Medici being the “legal acquirer” and Utilipoint the “accounting
acquirer”. The merger was effected pursuant to Agreement and Plan of Merger (the
“Merger Agreement”) dated August 10, 2009 by and among the Company, Utilipoint
International, Inc. and Utilipoint Acquisition Co. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 UtiliPoint shares (which
represented 100% of the then outstanding shares). Further, all outstanding
UtiliPoint options were exchanged for 172,597 Midas Medici options in accordance
with the Midas Medici stock option program, adopted on July 27, 2009.
Immediately after the closing of the merger and as of September 30, 2009, an
aggregate of 2,310,516 shares of common stock are issued and outstanding. Hence,
the 1,348,516 shares represented approximately 58% of the outstanding shares of
Midas Medici. The shares of common stock issued in connection with the merger
were not registered with the Securities and Exchange Commission and are
considered to be restricted securities. Knox Lawrence International,
LLC, KLI IP Holding, Inc. and UTP International LLC, stockholders of Utilipoint,
received an aggregate of 889,444 shares of our common stock and options to
purchase 27,168 shares of our common stock at the closing of the Merger in
exchange for 27,828 shares of Utilipoint and 850 options of Utilipoint. Prior to
the merger, Knox Lawrence International, LLC, owned 6,305 shares (14.9%) of
Utilipoint of which 4,855 were acquired on July 23, 2007, 1,250 were acquired on
December 31, 2008 and 200 were acquired on January 15, 2009. KLI IP
Holding, Inc. owned 0 shares or 0% of Utlipoint and UTP International LLC owned
21,523 preferred shares (51%) of Utilipoint which were acquired on July 23,
2007. At the closing of the merger, the preferred shares were
converted into common shares (51% of Utilipoint) at a ratio of one preferred
share for one common share. In exchange for their shares of
Utilipoint, each of Knox Lawrence International, LLC, KLI IP Holding, Inc. and
UTP International LLC received, 201,522 shares, 0 shares and 687,922 shares of
Midas Medici, respectively, in connection with the acquisition of Utilipoint by
Midas Medici. KLI IP Holding, Inc. received
27,168 options to acquire shares of Midas Medici at the closing of the merger.
Each of KLI IP Holding and UTP International has no operations and their
sole business is their current ownership of our shares acquired at the closing
of the merger. UTP International LLC is a wholly owned subsidiary of Knox
Lawrence International LLC. Prior to the merger, Knox Lawrence
International and its affiliates owned an aggregate of 65.9% of Utilipoint and
upon the consummation of the merger owns 38.5% of Midas Medici, which in turn
owns 100% of Utilipoint. Nana Baffour, our CEO and Johnson Kachidza, our
President and CFO are co-founders and Managing Principals of Knox Lawrence
International. Nana
Baffour, our CEO and Johnson Kachidza, our President are the principal
shareholders of Knox Lawrence International, LLC, KLI IP Holding, Inc. and each
own 373.5 membership units or 37.35% of Knox Lawrence International, LLC, 150
shares or 30% of KLI IP Holding, Inc., no membership units or 0% of UTP
International, LLC and have an indirect ownership in UTP International, LLC
through Knox Lawrence International, LLC.
At the
closing of the Merger, we also issued options to purchase 25,000 shares of our
common stock to David Steele, President of Utilipoint and options to purchase
10,000 of our common stock each to Peter Shaw, Managing Director of The
Intelligent Project, LLC ("IP") and Stephen Schweich, our director.
Knox
Lawrence International, LLC and its affiliates have had a close relationship
with Utilipoint through their ownership interests and by virtue of the
involvement of Messrs Baffour and Kachidza, who in addition to serving as our
CEO and President, respectively, are also Managing Members of Knox Lawrence
International, LLC and control KLI IP Holding, Inc. and UTP International,
LLC.
Nana
Baffour, our CEO and Johnson Kachidza, our President were directors of
Utilipoint since August
2007. Mr. Baffour became Chairman of Utilipoint's board in August 2007.
In August 2009 after the closing of the merger, Mr. Baffour, was appointed
as the CEO of Utilipoint.
Immediately
after the closing of the acquisition, but prior to this offering, an aggregate
of 2,310,516 shares of common stock were outstanding. The shares of
common stock issued by Midas Medici in connection with the acquisition were not
registered with the Securities and Exchange Commission and are restricted
securities.
25
Revenue
Our
revenue is generated through time-and-materials contracts, bundled service
agreements, fixed-price contracts, events and conferences, and other revenue.
Our revenue mix varies from year to year due to numerous factors, including our
business strategies and the procurement activities of our clients. Unless the
content requires otherwise, we use the term “contracts” to refer to contracts
and any task orders or delivery orders issued under a contract.
Under
time-and-materials contracts, we are paid for labor at fixed hourly rates and
generally reimbursed separately for allowable materials, other cost of services
and out-of-pocket expenses. Under bundled service agreements, the customers sign
one-year subscription agreements for a bundled set of analyst time and related
services. Under fixed-price contracts, we perform specific tasks for a
pre-determined price. Compared to time-and-materials and cost-based contracts,
fixed-price contracts involve greater financial risk because we bear the full
impact of labor and non-labor costs that exceed our estimates, in terms of costs
per hour, number of hours, and all other costs of performance, in return for the
full benefit of any cost savings. We therefore may generate more or less than
the targeted amount of profit or, perhaps, a loss. We solicit companies as event
sponsors and individuals as conference attendees.
Cost
of services
Cost of
services consist primarily of costs incurred to provide services to clients, the
most significant of which are employee salaries and benefits and reimbursable
project expenses incurred by our employees, all relating to specific client
engagements. Cost of services also include the costs of subcontractors and
outside consultants, third-party materials and any other related cost of
services.
Selling,
general and administrative ("SG&A")
SG&A
expenses include our management, facilities and infrastructure costs, as well as
salaries and associated fringe benefits, not directly related to client
engagements. Among the functions covered by these expenses are marketing,
business and corporate development, bids and proposals, facilities, information
technology and systems, contracts administration, accounting, treasury, human
resources, legal, corporate governance and executive and senior
management.
26
Results
of Operations
The
following discussion highlights results from our comparison of consolidated
statements of operations for the periods indicated.
Year
ended December 31, 2008 compared to year ended December 31, 2007
(dollars, in thousands)
Net
revenues. Net revenues for 2008 were $3,660.9, compared to $3,910.4
for 2007, representing a decrease of $249.5, or 6.4%. This decrease was due
primarily to negative macroeconomic market conditions, impacting clients'
budgets for research and consulting engagements.
Cost of
services. Cost of services for 2008 declined 5.2% to $2,037.0,
or 55.6% of net revenue, compared to of $2,149.1, or 55.0% of net revenues for
2007. The dollar value cost reduction reflects our efforts to keep our
costs in line with revenues.
Selling, general
and administrative expenses. Selling, general and administrative
expenses for 2008 were $1,777.6 , or 48.6% of net revenue, compared to $1,548.0,
or 39.6% of net revenue, for 2007. This 14.8% increase in selling, general and
administrative expenses resulted from a variety of factors including: hiring
additional staff to support our finance function and European operation and
increased professional services expenses. Depreciation and amortization expenses
for 2008 and 2007 were $17.9 and $10.9, respectively.
Operating income
(loss). For 2008, operating loss was $271.6, down $449.0 from an
operating income of $177.4 in 2007. The decrease was primarily due to the
decrease in net revenues and increase in cost of services as a percent
of revenue that resulted from lower staff utilization.
Interest and tax
expense. For 2008, interest expense was $63.9, compared to $66.4 for
2007. Our interest expense has remained steady during the reporting period
because long term debt remained relatively constant. We incurred income tax
benefit of $35.8 in 2008 primarily as a result of our operating loss versus
income tax expense of $45.7 in 2007 as a result of operating
profits.
Liquidity
and Capital Resources
Our
condensed consolidated financial statements have been prepared assuming that we
will continue as a going concern, which contemplates the realization of assets
and the settlement of liabilities in the normal course of business and,
accordingly, no adjustments have been made to recorded amounts that might result
from the outcome of this uncertainty. Our accumulated deficit at September 30,
2009 was $1,483,705 and we incurred a net loss of $741,964 for the nine months
ended September 30, 2009.
On
September 30, 2009 we had working capital deficit of $1,552,973. Historically,
Utilipoint has funded its operations with cash obtained mainly from stockholders
and third-party financings. As a wholly-owned subsidiary of Midas Medici,
Utilipoint anticipates receiving external financing (upon completion of Midas
Medici’s initial public offering) to fund its working capital needs which will
allow it to solve its liquidity issues. Utilipoint
is currently taking steps to improve its operational results and liquidity
including the following:
Increased
Staff Utilization – The Company has begun implementing programs to
increase staff utilization which management believes will improve
margins.
Increased
Business Development and Executive Leadership Resources – In July 2009,
we acquired of 60% of IP, a research and advisory services firm focused on
assisting utilities with the challenge of solving customer complexities of the
Smart Grid. With the acquisition of IP, two veteran executives joined
Utilipoint. We believe the addition of these individuals significantly increased
Utilipoint’s resources in business development and executive leadership.
Management believes this addition will significantly increase its revenues and
profits while optimizing operations.
Deferring
of Insider Obligations – The Company has on its books, as of
September 30, 2009, debts and obligations due to insiders of approximately
$500,000. These debts and obligations, some of which were due on August 20,
2009 in the amount of $21,309 have been deferred by those insiders and will
be paid out of the proceeds of this offering.
27
Following
this offering, we expect that our cash flow from operations and the proceeds
from the public equity offering will allow us to meet our anticipated cash
requirements for the next twelve months, excluding any additional funding we
will need to pursue our acquisition strategy. Such acquisitions, if entered
into, will be funded by the sale of additional debt or equity securities or
additional bank financing. The sale of additional equity securities could
result in additional dilution to our stockholders and there can be no guarantee
that we will be successful in raising those additional funds on terms that are
acceptable to us. Any acquisitions we undertake may be funded through other
forms of debt, such as publicly issued or privately placed senior or
subordinated debt.
Our
liquidity is affected by many factors, some based on the normal ongoing
operations of the business and others related to the uncertainties of the
industries in which we compete. Our liquidity may also be adversely affected by
the current economic conditions, including consumer spending, the ability to
collect our accounts receivable and our ability to obtain working capital. There
is no assurance that additional funds will be available on terms acceptable to
the Company and its stockholders, or at all.
Off-Balance
Sheet Arrangements
Utilipoint
does not have any off-balance sheet arrangements.
Contractual
obligations
The
following table summarizes our contractual obligations (excluding interest in
the case of debt) as of September 30, 2009 that requires us to make future cash
payments.
Maturities
of long-term borrowings at September 30, 2009 are as follows
Year
|
Amount
|
|||
2010
|
$ | 493,138 | ||
2011
|
- | |||
2012
|
108,969 | |||
2013
|
62,500 | |||
2014
|
25,000 | |||
Total
|
$ | 689,607 | ||
Impact
of our initial public offering
The
completion of this offering will have near and long-term effects on our results
of operations. In the future, our results of operations will be affected by the
costs of being a public company, including changes in board and executive
compensation, the costs of compliance with the Sarbanes-Oxley Act of 2002, the
costs of complying with the Security Exchange Commission (“SEC”)
and requirements imposed by any exchange we will list on, and
increased insurance, accounting and legal costs. These costs are not reflected
in our historic financial results.
Increased
Business Development and Executive Leadership Resources
In July
2009, with the Capital Contribution Agreement with The Intelligent Project, LLC
(refer to footnote #13 of the audited notes to the Company's consolidated
financial statements, Subsequent Events – Capital Committment Agreement with The
Intelligent Project, LLC), two executives joined our management
team. The addition of these individuals increased the Company’s
resources in business development and executive leadership. We
believe this addition of executive talent will position us to increase our
revenues and profits while optimizing our operations.
Critical
Accounting Policies and Significant Judgments and Estimates
Our
discussion and analysis of our financial condition and results of operations are
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States, or GAAP. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. We review our estimates on an ongoing basis, including those
related to allowances for doubtful accounts, fair value of common stock options,
certain revenue recognition related to contract deliverables, valuation
allowances for deferred tax assets, rates at which deferred tax assets and
liabilities are expected to be recorded or settled, accruals for paid time off
and the estimated labor utilization rate used to determine cost of services. We
base our estimates on historical experience, business trends and events, and
various other factors that we believe to be reasonable under the circumstances,
the results of which form our basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
Our
management believes the following accounting policies and estimates are most
critical to aid you in understanding and evaluating our reported financial
results.
28
Revenue
Recognition
We
recognize revenue under our contracts when a contract has been executed, the
contract price is fixed and determinable, delivery of services or products has
occurred, and collectability is considered probable and can be reasonably
estimated. Contract revenue recognition inherently involves the use of
estimates. Examples of estimates include the contemplated level of effort to
accomplish the tasks under contract, the cost of the effort, and an ongoing
assessment of the Company's progress toward completing the contract. From time
to time, as part of our standard management process, facts develop that require
us to revise our estimated total costs and revenues. To the extent that a
revised estimate affects contract profit or revenue previously recognized, we
record the cumulative effect of the revision in the period in which the facts
requiring the revision become known. The full amount of an anticipated loss on
any type of contract is recognized in the period in which it becomes probable
and can be reasonably estimated.
We have
multiple service offerings to our client base for which revenue is recognized as
follows:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed to price
for defined deliverables. We recognize revenue when a deliverable is
provided.
On
occasion, clients with fixed price contracts will require an accounting of all
hours worked on a project at an agreed to hourly rate to accompany an invoice.
In that case, we recognize revenue up to the amount the time records support,
because clients requiring time reporting with hourly rates on fixed price
contracts typically can only ask for refunds on fixed price projects up to the
amount determined as if the contract had been time and materials. With
acceptance of the final deliverable, all revenue is recognized.
Bundled
Service Agreements (“BSAs”)
BSAs are
packages of services that clients subscribe to, typically on an annual
contract basis. The services typically include a combination of the
following:
•
|
Access
to subject matter experts as needed, by
telephone
|
•
|
Discounted
fees for Company events
|
•
|
Advertising
space on the IssueAlert®
e-publication
|
•
|
One
to three reports and/or whitepapers on industry
topics
|
•
|
Briefings
on industry trends and research
findings
|
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, ISOs (Independent System Operators), and consumer advocacy
groups to come together and discuss meter data management successes, problems,
issues, interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to the Company's directory
and InfoGrid products. The primary service is the block of hours
purchased.
We
believe that the substance of BSAs, as pointed out in a recent survey of its
clients, is that the purchaser pays for a service that is delivered over
time. As a result, revenue recognition occurs over the subscription
period, or, in the case of corporate contracts, as the hours are
utilized.
Time
and Materials Contracts (“T&M”)
T&M
are services billed at a set hourly rate. Project related expenses are
passed through at cost to clients. Normally clients are invoiced on
monthly basis. We recognize revenue as billed unless the project has a major
deliverable(s) associated with it, in which case the revenue is deferred until
the major deliverable(s) is provided.
Events
and Sponsorships
We host
events such as conferences. These events include revenues from sponsorships and
registration fees which are recognized upon the occurrence of the event.
Revenues from sponsors of the AMI MDM forum are recognized over the annual
subscription period, reflecting the pattern of provision of
service.
29
BUSINESS
Overview
We are a
clean energy company that provides services to utilities and others to further
the development of the electric grid. The electric grid is the entire
infrastructure available to generate, transmit, and distribute electricity to
end users. We define the “Smart Grid” as the electrical grid, enhanced by a full
spectrum of technologies and solutions designed to make it function more
efficiently, reliably and securely. We believe the Smart Grid will enable
consumers to make smarter decisions about electricity consumption, helping curb
the rising demand for electricity while reducing their carbon
footprint.
In much
the same way that technological advances in microprocessors, power electronics
and the internet revolutionized the telecommunications industry, we believe that
technological advances are transforming the traditional electrical grid into a
“Smarter Grid” and significantly improving its capabilities. Key
elements of the Smart Grid include the ability to: introduce clean energy
sources into the grid; transmit, store and analyze data along the grid;
communicate information between all segments of the grid; automate certain
functions of the grid using advanced control systems and devices; and reduce the
carbon footprint using various products, processes and services for remote
demand management and ensuring affordability of electrical power.
In
October 2008, the U.S. Department of Energy released a study, “The Smart Grid:
An Introduction”, in which it estimated that for the past 20 years, demand
growth has exceeded supply growth by 25% per year. As a result, power outages
are estimated to cost U.S. businesses $100 billion per year, with 41% more power
outages in the second half of the 1990s than in the first half. Smart Grid
enhancements will ease congestion and increase utilization of generating
capacity, sending between 50% to 300% more electricity through the existing
electrical grid.
Through
our wholly-owned subsidiary, Utilipoint, we provide energy industry consulting
services and proprietary research in seven practice areas that encompass the
entire energy and utility value chain, including:
·
|
Smart Meter Deployment
–1) research and consulting focused on more effective deployment of smart
meters to customers, and 2) efficient management of data traffic between
end-users and providers of electricity;
|
·
|
Energy Investments &
Business Planning –investment decision support to utilities and
investment firms;
|
·
|
CommodityPoint
–research and advisory services designed to assist commodities traders to
manage trading risk;
|
·
|
Meter-to-Cash
–independent research and consulting services applied to the
utility-customer cash cycle from when a meter is read to the point cash is
received;
|
·
|
Pricing & Demand
Response –design mechanisms for utilities and their regulators to
for setting electricity rates;
|
·
|
Public & Regulatory Issues
Management –regulatory, legal and policy support services for
issues associated with the generation, transmission and distribution of
electricity; and
|
·
|
The Intelligent Project
–highly structured, issue-focused research and executive forums to assist
executives in analyzing customer related issues associated with the “Smart
Grid”.
|
Founded
in 1933, Utilipoint built its brand name in the power utility industry by
supplying market data intelligence to major US utilities spanning the entire
market segment from generation to consumption. Today, Utilipoint is a full
service energy-focused consulting firm, providing independent research-based
information, analysis, and consulting to energy companies, utilities, investors,
regulators, and industry service providers alike.
In
addition, we host annual conferences in the US and Europe targeted to our client
base to discuss topical issues in the clean energy and Smart Grid
sector. These conferences bring together key energy industry
participants such as regulators, business executives, policy makers, and
investors serving the energy industry. Our flagship US annual conference
attracted approximately 200 participants in 2008. Our second annual
European conference attracted approximately 100 participants in 2008. Our
clients include utilities, investors, regulators, and energy industry vendors
and service providers both domestically and internationally.
According
to the International Energy Agency’s World Energy Outlook 2008, electric power
infrastructure will require cumulative worldwide investment of over $13.6
trillion (in 2007 dollars) in 2007-2030, or 52% of the total electrical
infrastructure needed. On a national level, and according to the Brattle Group,
investment totaling approximately $1.5 trillion will be required between 2010
and 2030 to pay for grid infrastructure in the United States. We believe we are
well positioned to benefit from the unprecedented investment in the power
sector, worldwide.
30
Our
Strategy
Our goal
is to become a global leader in alternative energy and Smart Grid solutions. Our
strategy is to grow our business both organically and through acquisitions by
leveraging the knowledge and experience of Utilipoint and the experience of our
management team’s in operating energy services companies and in acquisitions.
Prior to joining our company, our management team has acquired and operated
businesses with an aggregate enterprise value of approximately $600 million in
the energy services sector. We intend to identify new areas of growth and expand
our activities beyond our current consulting business. We targeted
the following areas of growth in the energy sector: engineering services; data
and information technologies; and financial services.
Accelerate
organic growth
Our
organic growth strategy has been to build technology, systems and back-office
infrastructure to complement our strategy of increasing market awareness of the
Utilipoint brand. The technology, systems and back-office infrastructure
makes use of shared platforms, collaboration tools, disaster recovery, and
business continuity applications to safe guard databases and enable a mobile
workforce. This strategy is designed to generate significant financial and
operating leverage by attracting proven practice leaders who, in turn, make use
of our technology, systems and back-office infrastructure as well as our brand
to generate additional revenues and profits
Our
market awareness and branding efforts capitalize on Utilipoint’s long history in
the energy industry, the breadth and scope of its IssueAlert® product and other research
publications, its conferences as well as partnerships with media organizations
like Forbes and the Great Transformers interview series.
This
strategy leverages Utilipoint’s Client Engagement Model shown below. The
Utilipoint Client Engagement Model provides a method for delivering ongoing
strategic value to our clients.
Figure 1.
Utilipoint’s Client Engagement Model
Pursue
strategic acquisitions
A key
element of our growth strategy is acquiring companies providing services and
solutions that support the development of clean energy and the Smart Grid. We
believe that we can leverage our management team’s expertise in investing in and
operating companies in the energy services sector to expand our activities and
leverage Utilipoint's core area of consulting services for marketing additional
products and services. We plan to pursue an acquisition strategy to obtain new
customers, increase our revenues and market presence and obtain capabilities
that complement our existing portfolio of services, while focusing successfully
integrating the acquisitions and their financial impact.
Our
acquisition strategy cuts across the four major segments of the electricity
grid: generation, transmission, distribution and end-use consumption. We believe
that the ability to provide services that apply across the four segments
provides the greatest opportunity to impact the development of the Smart
Grid. We believe that a comprehensive product offering will
differentiate us from the other companies serving our industry
sector.
• Generation: We believe that
firms which provide technology or processes to allow power generation into the
grid from alternative forms of energy such as solar, wind or hybrid cars enhance
the Smart Grid by reducing carbon emissions. Companies that provide clean coal
solutions, solutions to integrate renewables into the existing electric grid,
load and asset management systems, engineering services, distributed generation
technologies and support services are all critical components of Smart Grid
solutions and will help reduce emissions, improve efficiency, increase
reliability and promote source diversity and energy independence.
• Transmission: The transmission
system can also benefit from technologies, devices and solutions including grid
automation systems, superconducting wires, transmission support services,
engineering services, Supervisory Control and Acquisition Data Systems (SCADA)
management systems, visualization systems for control rooms, and control and
management systems for dispatch. Companies providing these services and
solutions enable utilities and transmission system operators to deliver
electricity more efficiently, securely and reliably. We plan to acquire and grow
firms that provide these types services or solutions.
• Distribution: We believe that
enhanced information and communication between the utility and end-consumers is
a very powerful aspect of a Smart Grid. Firms which provide the hardware and
software around advanced meters and meter data management, or provide
professional services around smart meter deployments and demand response
programs, will be well positioned to benefit from the evolution of the Smart
Grid.
• End-Use Consumption: The
entire power infrastructure culminates in the usage of electricity by customers
in homes and businesses. Understanding end-user behavior patterns and drivers is
critical to the successful deployment of most Smart Grid solutions and
technologies. Utilipoint’s acquisition of The Intelligent Project is
the first step towards participating in this critical aspect of the Smart
Grid. We intend to acquire more companies providing tools and
services that serve, analyze and educate the end-user.
Some of
the types of businesses that we have identified for possible acquisition
include:
·
|
Engineering
companies that provide enabling solutions to the Smart Grid
infrastructure;
|
·
|
Technology
companies that provide data warehousing technology infrastructure and data
center solutions;
|
·
|
Companies
that facilitate financing of energy efficiency initiatives for consumers
and commercial enterprises; and
|
·
|
Other
Smart Grid-related companies or products and services aimed at commercial
and industrial customers and
consumers.
|
Currently
we have no agreements, plans or arrangements with any third parties for any
acquisitions. There can be no assurance that we will be able to
consummate any strategic acquisitions, or if we are able to do so, that any one
or more acquisition will prove to be profitable or otherwise beneficial to our
company.
31
Consistent
with our strategy, we made our first acquisition in August 2009, when we
acquired Utilipoint International, Inc., a full service energy-focused
consulting firm, providing independent research, information, analysis, and
consulting to energy companies, utilities, investors, regulators, and industry
service providers.
On July
1, 2009, Utilipoint completed the acquisition of 60% of The Intelligent Project,
LLC, a research and advisory services firm that provides consulting services to
help clients understand and consider the Smart Grid’s impact on end user
customers, critical to successfully deploying Smart Grid solutions. The
Intelligent Project produces highly structured, issue-focused research and
executive forums to enable dialogue, innovative thinking and solutions-based
strategies to emerge. The Intelligent Project’s product offering is designed to
assist executives consider customer related issues associated with the Smart
Grid to ensure customers’ acceptance and Smart Grid penetration. It is
headquartered at Purdue Research Park in West Lafayette, Indiana. As part of the
transaction, we have retained The Intelligent Project’s senior management, David
Steele and Peter Shaw. Mr. Steele and Mr. Shaw are veteran utility executives
who will support us in implementing our business strategy.
Leverage
our management team’s industry experience
Our
management team, led by our CEO, Nana Baffour, and President, Johnson Kachidza,
possesses a breadth and depth of industry experience which we believe will
directly enable us to achieve our growth objectives. We believe that our
relationships with utilities, regulators, vendors, technology leaders and
investment professionals will prove valuable to us as we execute our business
strategy. Prior to joining our company, the members of our management team
successfully completed, as principal investors and operators, 11 energy services
acquisitions with an aggregate enterprise value of approximately $600
million. We believe that their experience and expertise will increase
the likelihood of our succeeding in acquiring and managing energy services
companies.
Grow our client base and increase
scope of services provided to existing
clients.
We intend
to grow our client base by expanding our geographic presence domestically and
internationally, as well as increasing the scope of services we provide our
clients. We expect to focus our international expansion first on Europe,
leveraging Utilipoint’s European headquarters in the Czech
Republic.
Focus on higher margin contracts and
recurring revenue.
We
currently invoice our clients for our services based on either fixed price
contracts, time and materials contracts or under “bundled service” arrangements
(subscription agreements for a bundled set of analyst time and related services,
typically renewed annually). We plan to focus our efforts on obtaining energy
consulting assignments in the form of subscription-based revenues and bundled
service agreements, which we believe will provide us with higher profit margins
and increase the share of our revenue that is recurring.
Strengthen
our end-to-end service offerings.
We plan
to increase the number of services we market to each client, growing our revenue
mix and using the comprehensive nature of our service offerings as a competitive
advantage. We believe our advisory services provide us with insight into market
gaps that may not be evident to our competitors. Additionally, we feel we are
positioned to capture a greater portion of the implementation work on the Smart
Grid that directly results from our advisory services. We believe that expanding
our client engagements into implementation and evaluation and improvement
services will increase the scale, scope and duration of our contracts and thus
accelerate our growth.
Build
upon our brand equity, invest in marketing and enhance customer relationship
management.
Through
our subsidiary Utilipoint, we enjoy 76 years of brand recognition as an industry
expert and leader in the energy utility consulting segment spanning generation,
transmission, distribution, and end-use consumption. We intend to invest in
development and marketing initiatives in order to strengthen our brand
recognition among potential clients. An integral part of our customer strategy
is implementing our customer relationship management process that enables us to
manage our customer base more effectively as customers spend more on our
services. Through Utilipoint, we served 132 clients during fiscal year
2008. We intend to distinguish ourselves as a diversified clean energy and Smart
Grid focused company, which, we believe, will increase the number of clients
seeking our services as well as expand the acquisition opportunities available
to us.
32
Leverage our
operations.
We have
designed our corporate infrastructure and systems to be scalable and to
accommodate additional growth without a proportionate increase in costs. We have
invested significant time and resources in developing our acquisition,
integration, strategic and operational management processes and methodologies.
As our revenue base grows, we expect to realize operating leverage by spreading
the costs associated with our corporate infrastructure and internal systems over
a larger revenue base, which would increase our operating margins. We believe
that our knowledge base can be used to identify additional organic and
acquisition growth opportunities.
Our
Competitive Strengths
We
believe that our broad product offering, our industry experience and our
expertise position us well for rapid expansion into the clean energy and Smart
Grid space. We believe that our competitive strengths include:
We
have an experienced management team.
Our
management team possesses extensive experience managing, acquiring and
integrating energy services businesses. We believe our relationships with senior
executives throughout the electrical energy industry and our comprehensive
understanding of the US regulatory framework provide us with the insight to
identify, and the skills to take advantage of, opportunities. We
think that our proven processes and methodologies will help us target, implement
and integrate acquisitions.
In
addition, our management team has a history of successfully building companies
into stable and positive cash flow generating assets through organic, strategic
and operational expertise and leveraging critical partnerships. Over the
past decade, our management team has developed processes for operating and
growing businesses including incentivizing management, monitoring operational
and financial performance, managing sales and marketing and customer
relationships. Furthermore, we believe that our management team’s
industry relationships will enable us to attract the people we need to support
our acquisition strategy.
We have a highly experienced
professional staff with deep subject matter
knowledge.
Management
believes the in-depth subject matter knowledge of our experts coupled with the
corporate experience we have developed over decades of providing advisory
services at the intersection of electricity and technology position us as a
valuable resource to our clients and distinguish us from our
competitors. More than 50% of our professional staff holds post-graduate
degrees in such diverse fields as economics, engineering, business
administration, information technology, law, life sciences and public
policy. In addition, our consultants have an average of 20 years of
industry experience. We believe their experience and qualifications enable us to
deploy multi-disciplinary teams able to identify, develop and implement
solutions that are creative, pragmatic and tailored to our clients’ specific
needs.
Long-standing relationships with our
clients.
In the
year ended December 31, 2008, Utilipoint served 132
clients. Through our Utilipoint subsidiary, we maintain a highly reference-able
customer base and long-standing relationships with our clients and industry
executives. We believe that our existing client base, provides an excellent
foundation to acquire additional clients, while also providing opportunities to
sell additional products and services to our existing clients. We
believe that our client base is a value creator for our acquisition program
since it enhances our reputation as a business, making us a desirable
buyer.
Versatile
advisory services practice. We
believe our advisory approach to consulting, based on providing customized
solutions to best address our clients’ requirements and objectives, gives us a
significant competitive advantage, permitting us to gain access to key client
decision makers during the initial phases of their policy, program, project or
initiative which we hope to leverage into opportunities for other facets of our
business.
Our
analytical models and methods allow us to deliver solutions to
clients.
We have
developed energy-planning, benchmarking and pricing models that are used by
municipalities and utilities around the world. In addition, we have developed a
suite of proprietary tools, databases and project management methodologies that
are utilized on client engagements. We have developed proprietary research
databases, tools and publications such as Utilipoint’s Technology Vendor
Analysis Matrix, QuickStrategy methodology and IssueAlert®, all of which we
believe promote our competitive advantage in the energy consulting industry. Our
coal plant database is widely used by power generators and their vendors to make
decisions about emission control systems, siting and maintenance programs for
coal plants. Our demand response database includes data from
measuring the effectiveness of demand response programs across 3,000 utilities
in the US, which have been used in a 2008 report by the US Congress on demand
response initiatives. We believe that these tools cannot be easily duplicated
and therefore provide us with a competitive advantage.
33
Our
Clients and Contracts
In
2008, we had 132 clients and forty-eight percent of total 2008
revenue, or approximately $1.6 million, were generated from returning customers
and approximately $1.8 million from new customers. Our clients are
international, with representation stretching across North America, South
America, Europe, Asia, Africa, Australia and the Middle East. We are active in
sectors including utilities, investors, regulators, and energy industry service
providers such as vendors to utilities, both domestically and
internationally. These industries include companies such as General
Electric, Electronic Data Systems (EDS), SAP, Eskom Holdings, Union Fonesa SA,
ICAP Energy, International Power, Alliance Data and several other blue chip
utility companies. No one single client represented more than 10.0%
of total net revenues in 2008.
We
currently have a variety of contractual arrangements with our clients, which
include:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed to price
for defined deliverables.
Bundled
Service Agreements
Bundled
Service Agreements, or BSAs, are packages of services that clients subscribe to,
typically on an annual basis. The services typically include a
combination of the following:
•
|
Access
to subject matter experts as needed, by
telephone;
|
•
|
Discounted
fees for Utilipoint events;
|
•
|
Advertising
space on the IssueAlert®
e-publication;
|
•
|
One
to three reports and/or whitepapers on industry topics;
and
|
•
|
Briefings
on industry trends and research
findings
|
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, ISOs (Independent System Operators), and consumer advocacy
groups to come together and discuss meter data management successes, problems,
issues, interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to Utilipoint’s
directory and InfoGrid products. The primary service is the block of hours
purchased.
Time
and Materials Contracts
Time and
material contracts are services billed at a set hourly rate. Project
related expenses are passed through at cost to clients. Normally, we
invoice our clients on a monthly basis.
Our
Services
Smart
Meter Deployment
Our Smart
Meter Deployment practice provides market research, consulting and project
management services to utilities, regulators, and vendors deploying smart meter
technology in the marketplace. We work with utilities to help manage smart meter
pilot programs and technology implementations by managing all elements of the
service offering including: program design, vendor selection, project planning
and meter data management and data analysis.
34
As an
example of our Smart Meter
Deployment services, we are currently managing a residential
smart meter installation and smart meter pricing pilot, where 1,400 end users
will use a combination of technology and innovative rate pricing structures to
reduce electricity usage. The pilot was sponsored by the local public utility,
the State’s Public Utilities Commission, and a consumer advocate group. We
believe it is the first in the world to test smart metering with three different
advanced residential rate options.
Energy
Investments & Business Planning
Our
Energy Investments practice provides business planning and market studies, and
helps refine business plans for companies looking for external funding,
acquisition opportunities, and investment decision support. Our consultants and
analysts have an understanding of the regulatory considerations impacting
investment in the sector and unique strategy modeling and investment decisions
support capabilities. We also work with investor groups, venture capital and
private equity firms on independent analysis of investment
opportunities.
As an
example of our business planning services we were hired by a local utility
company in Washington to advice on upcoming public vote on whether to form a new
electric utility. Our assignment included performing asset and a business
valuations, economic and engineering feasibility studies and presentations of
the results in numerous public forums. We believe our involvement helped to
successfully mitigate the requirement for additional capital investment by the
client.
CommodityPoint
Our CommodityPoint
practice provides expert information, independent research, market studies,
consulting and analyst services in the area of energy trading, transaction and
risk management. We believe that our practice professionals are acknowledged and
accomplished experts in their field and are relied upon by our clients to
provide unambiguous and independent advice and information.
Our
CommodityPoint practice recently released its 2009 TRM Vendor Perceptions Study
report. The CommodityPoint TRM Vendor Perception study is repeated every two
years and represents a view of how users and prospective buyers perceive the
market landscape. We believe that by capturing a representation of user and
buyer perceptions about the vendors in the space much can be learned regarding
market maturity and the overall evolution of TRM software. This study was
conducted during the first quarter of 2009 and represents user and buyer views
as of the close of 2008.
Meter-to-Cash
Our
Meter-to-Cash practice provides expert information, independent research, market
studies, consulting and analyst services in the areas of customer care, customer
information systems and customer relationship management. Our professionals
are relied upon by our clients to provide unambiguous and independent
advice and information. Our Meter-to-Cash clients include utilities,
cooperatives, municipals, technology vendors, software vendors and regulatory
agencies.
As an
example of our Meter-to-Cash services, the a Canadian Public Utility Commission,
ordered a collaborative process to benchmark gas and electric customer care and
billing using Utilipoint’s database. As a result, the Commission was able to use
the study results to set gas and electric rates.
Pricing
& Demand Response
Our
pricing and demand response practice provides electricity market design and
pricing services to electricity market stakeholders. Our clients include
independent system operators, utilities, competitive load serving entities,
demand response program providers, state and federal regulatory agencies, and
businesses and investors with an interest in the design and operation of
electricity markets.
As an
example of these services, the Energy Policy Act of 2005 mandated demand
response as the official policy of the United States. On behalf of the Federal
Energy Regulatory Commission, or FERC, we surveyed over 3,000 utilities in the
United States and performed analysis that contributed to a FERC Staff Report on
Demand Response and Smart Metering published in 2006 and 2008 and sent to
Congress as an update on progress on Smart Grid related issues including
demand response and advanced metering initiatives.
35
Public
& Regulatory Issues Management
Our
Public & Regulatory Issues Management practice has a 25-year track record of
working with utilities to manage potentially controversial public, regulatory,
and legal issues. We believe that with our assistance, utilities can enhance
public trust, and improve communications with their customers and the
public.
As an
example, in 2008, Utilipoint was hired to design a public outreach process
including documentation of the project for public use in connection with a
proposed nuclear plant and the associated 200 miles of new transmission
facilities. The project was approved by state regulators with no organized
public opposition.
The
Intelligent Project, LLC
The
Intelligent Project, LLC helps clients address and understand issues
related to the end user elements of the Smart Grid, including customer focused
research and access to experts in various customer experience
disciplines. Management believes that Utilipoint’s acquisition of The
Intelligent Project, LLC in July 2009 positions us to be a leader in dealing
with Smart Grid customer-related issues. The Intelligent Project
brings together power industry executives with executives from other industries
where significant customer transformation has occurred, such as
telecommunication, financial services and retail industries where technology and
regulations have transformed the customer experience to expose the power
industry to events that reshaped other sectors of the economy.
In 2009,
The Intelligent Project was hired by a Mid-Atlantic utility to develop a
progressive ‘voice of the customer’ program to enable the utility to assess the
impact of its upcoming smart meter deployment. The team from The
Intelligent Project, in partnership with academic resources from Purdue
University, designed and facilitated customer focus groups and specialized
research to provide data and analyses to help the client determine the best
pricing models to induce adoption of smart meters.
Acquisition
of the Intelligent Project,
LLC
On July
1, 2009, Utilipoint acquired a 60% interest in IP. Prior to the
acquisition, IP was controlled by KLI IP Holding, Inc., which held a 75%
interest in IP. KLI IP Holding, Inc. is controlled by Nana Baffour,
our CEO, and Johnson Kachidza, our President, who held an aggregate 60%
interest in KLI IP Holding, Inc.
IP was
founded on March 10, 2009, by KLI IP Holding, Inc. and David Steele, the current
president of Utilipoint and former President of a predecessor KLI portfolio
company. Nana Baffour was the managing member of IP prior to the
acquisition by Utilipoint. IP’s management committee consisted of
Nana Baffour, Johnson Kachidza, David Steele and Ken Globerman, an employee of
Knox Lawrence International, LLC. Prior to the acquisition, David Steele, a
managing director of IP was also a senior managing director of
Utilipoint. From inception to when IP was acquired by Utilipoint, its
operations were funded through loans from Knox Lawrence International,
LLC. which are evidenced by a 5%, $108,969 note issued by IP to
KLI IP Holding Inc., which matures on June 30, 2012. The note will be repaid out
of the proceeds of this offering.
Prior to the acquisition of IP, Utilipoint was
controlled by UTP International, LLC (“UTPI”), which held a 51% interest in
Utilipoint. UTPI is a wholly owned subsidiary of KLI, in which Nana
Baffour, our CEO and Johnson Kachidza, our President, held
an indirect controlling interest.
Nana
Baffour, our CEO and Johnson Kachidza, our President were directors of
Utilipoint since August
2007. Mr. Baffour became Chairman of Utilipoint's board in August 2007.
In August 2009 after the closing of the merger, Mr. Baffour, was appointed
as the CEO of Utilipoint.
In
connection with the IP acquisition, Utilipoint entered into the following
agreements:
(A) a
Capital Commitment Agreement (the “Capital Agreement”) pursuant to which
Utilipoint committed to contribute up to $200,000 to IP, as may be requested by
IP, but in no event not in excess of $25,000 in any single request. The parties
contemplated that the capital contributions under the Capital Agreement may be
satisfied by capital contributions which KLI intended to make to Utilipoint in
the amount of $200,000 and therefore any failure by Utilipoint to make a capital
contribution to IP because it has not received sufficient funds from KLI will
not constitute a default under the Capital Agreement.
(B) a
Management Services Agreement with IP pursuant to which Utilipoint will provide
management services and provide consultants to assist IP with IP
projects. The services will include, but are not limited
to: (i) assisting in the preparation of annual budgets, (ii)
providing sales, marketing and strategic services, (iii) assisting IP with
complying with reporting requirements under any financing agreements, (iv)
providing legal, human resources, loss prevention and risk management services;
(v) providing receivables collection services, cash management services and
payroll services, (vi) any other service performed or expenses incurred by
UtiliPoint for IP in the ordinary course of business. In addition,
under the Management Service agreement, Utilipoint is authorized to make
payments to creditors of IP on its behalf and to collect receivables on behalf
of IP; provided Utilipoint has assurance that the necessary funds for discharge
of any liability or obligation will be provided by IP.
Management
services will be charged to IP based on the actual expenses incurred by
Utilipoint, and consultants will be charged at the same rate that Utilipoint
charges to subcontract its consultants to third
parties.
Utilipoint
will also pay all salaries and benefits for certain employees of IP who will
also provide services to Utilipoint, which will initially include David Steele
and Peter Shaw. The Management Services Agreement has a two-year
term, and, thereafter, automatically renews for one-year terms. It
may be cancelled by either party on 60 days prior written notice.
(C) an
Agreement to be Bound to the Limited Liability Agreement of IP. The IP LLC
Agreement provides that Net Cash Flow will be distributed as follows: first,
contributed capital will be returned to the members on a pro rata basis (based
on the amount of capital contributed), and, thereafter, Net Cash Flow will be
distributed to the members on a percentage ownership
basis. Utilipoint’s percentage ownership immediately after the
execution of the agreement by Utilipoint will be 60%.
The
Limited Liability Company Agreement further provides for restrictions on the
transfer of Company Interests (only to Permitted Transferees) and provides that
the Members holding a majority of the Company Interests may drag-along the
minority members in the event of a Sale of the Company.
36
(D) a
Consulting Agreement which provides that KLI IP Holding Inc. will provide
consulting services to Utilipoint in connection with the joint business and
marketing efforts of Utilipoint and IP. The agreement has a term of
24 months and may be terminated by either party upon 90 days advance written
notice. In exchange for its services KLI IP Holding Inc. will receive
an option to purchase 850 shares of common stock of Utilipoint, which options
were converted at the closing of the Utilipoint Acquisition into options to
purchase 27,168 shares of common stock of Midas Medici, at an exercise price of
$1.56 per share. The options are exercisable for a term of 5 years
through August 21, 2014 and are fully vested. If KLI IP Holding Inc. terminates
the agreement without cause within its first year, any unexercised options held
KLI IP Holding Inc. will terminate.
(E) a
Revolving Senior Subordinated Debenture which provides that KLI may loan up to
$100,000 to Utilipoint. The debenture has a term of 5 years and pays
interest at a rate of 10% per annum. Accrued interest and unpaid
interest is payable monthly (the parties can agree to mutually defer interest
payments), and the unpaid principal amount is due on the five-year anniversary
of the debenture. The debenture is subordinate to all indebtedness,
liabilities and obligations of Utilipoint to any financial
institution.
(F) a
subscription agreement pursuant to which KLI agreed to purchase up to $100,000
of the common stock of the Company at a per share purchase price of $50.00 per
share for a period of up 2 months through September 1, 2009. KLI did not
purchase any shares under the subscription agreement.
Industry
Background
The
Electrical Power Industry
The
electrical power industry can be divided into four segments: Generation,
Transmission, Distribution, and End-Use Consumption. Generation is the process
of producing electrical energy or the amount of electrical energy produced by
transforming other forms of energy. Transmission refers to the high-voltage,
long-distance transfer of electricity. Distribution refers to medium-voltage,
medium-distance transport from transmission substations to customer meters.
Furthermore, distribution and transmission are commonly referred to together as
the “grid”. End-Use Consumption is the use of electricity by residential,
commercial and industrial customers.
Figure 2:
The “traditional electric” power value chain encompassed centralized generation,
high-voltage transmission, medium-voltage distribution, and end use by
industrial, commercial and residential customers.
The
federal government began regulating the utility industry with the passage of the
Public Utility Holding Company Act of 1935, (“PUHCA”). PUHCA regulated
vertically integrated monopolies that generate, transmit and distribute
electricity to end users in predefined service regions. These
vertically integrated utilities are also regulated by the Federal Energy
Regulatory Commission (“FERC”) and at the state level by the Public Utility
Commissions. The FERC regulates the interstate transmission of natural gas, oil
and electricity, including wholesale sales of electricity outside
the utilities’ predefined service region, while the PUCs generally
regulate the quality of service and rates charged to retail
customers. The rates are designed to recover a PUC-determined return
on investment as well as other costs incurred by the utilities.
37
Over the
past 30 years, the benefits of the monopoly nature of the industry have been
questioned and challenged. The rationale for deregulation has been driven by
various factors, including: (1) a need to reduce end-user rates by introducing
competition among utilities; (2) advances in technologies used to generate
electricity that made it possible to produce electricity more cost effectively
on a smaller scale thereby allowing the introduction of other efficient
generating sources into the grid; (3) a growing consensus that the laws
introduced in 1935 became obsolete with time. The FERC and the PUCs have driven
an industry restructuring meant to enable and encourage the development of
more efficient generation sources and to permit increased competition in order
to reduce prices. The most fundamental change to the electrical energy business
has been breaking up the vertically integrated utilities by separating the
generation from their distribution functions. In these restructured markets,
utility companies continue to operate and maintain local distribution,
delivering electricity to consumers at regulated prices as before, but power
generators and electricity suppliers are now allowed to openly compete to sell
their electricity at market prices. ISOs and RTOs have been formed in these
deregulated markets to operate the power systems, including transmission lines,
energy trading, coordinating the wholesale of electricity, and establishing
electricity markets.
In a
deregulated environment, all utilities owning transmission lines are required to
allow access to other generating sources under the same terms as the utility
itself. This has facilitated the development of a wholesale market for
electricity as power generated in one service region can be transmitted and sold
to another, promoting competition and choice for end-users. On the other hand,
the deregulated market structure has introduced challenges such as grid
congestion as various power producers seek to transmit and sell power in other
regions, thereby compromising the reliability of the grid. To address this
potential problem, the National Electric Reliability Council has the
responsibility, under the direction of FERC, to monitor the grid operators in
order to maintain reliability standards designed to avoid service
disruptions.
As the
demand for electricity has soared, grid operators and utilities in both
deregulated markets and in traditional regulated markets face the challenge of
providing electricity reliably during periods of peak demand. Typically, higher
consumption during peak demand is accommodated by building more generation
capacity, which exacerbates greenhouse gas emissions, or buying wholesale power
from other regions, which leads to grid congestion thereby compromising its
reliability. Recently, government legislation, such as the Energy Policy Act of
2005, The Clean Air Act of 2005, the Energy Independence and Security Act of
2007, and the American Recovery and Reinvestment Act of 2009 have been
promulgated to address national and global issues pertaining to energy security,
energy independence and environmental concerns. The key structural changes in
the utility industry and recent legislations have all laid the groundwork for
the implementation of the Smart Grid by:
·
|
Expanding
the sources of generation to include more efficient and environmentally
friendly resources such solar and
wind;
|
·
|
Opening access
to the transmission and distribution system to facilitate wholesale
trading of electricity between regions to introduce competition;
and
|
·
|
Providing
consumers with choices of where to purchase power further promoting
competition.
|
Once
implemented, we believe the Smart Grid will address the current constraints of
the existing grid and make it function more efficiently, by:
·
|
Improving
reliability through the enhanced monitoring of the grid using
technology-based tools such as digital electronics and advanced controls
to avoid power outages;
|
·
|
Maintaining
power affordability by facilitating competition and energy efficiency
through reduced usage;
|
·
|
Reinforcing
U.S. global competitiveness by promoting energy independence and energy
security;
|
·
|
Accommodating
renewable energy sources on the
grid;
|
·
|
Helping
reduce the carbon footprint by decreasing consumption and thus reducing
the need to build new power plants;
|
·
|
Increasing
effective supply by reducing blackouts and brownouts through data-driven
grid management, optimizing capacity allocation and demand response and
management
|
·
|
Facilitating
cost savings for utilities by automating tasks such as meter reading or
remote grid monitoring; and
|
·
|
Introducing
efficiencies yet to be envisioned driven by further advances to the Smart
Grid.
|
38
Recent
acceleration in demand for power on a global scale
According
to the Energy Information Administration (EIA) Annual Energy Outlook 2008
(updated for the provisions of the American Recovery and Reinvestment Act),
about 218 gigawatts (“GW”) of new generating capacity will be needed from 2007
to 2030, out of which only 47 GW are planned. Worldwide, according to EIA, net
electricity generation increases by 77%, from 18.0 trillion kilowatt hours in
2006 to 31.8 trillion kilowatt hours in 2030. To put that growth in concrete
terms, the world will need the equivalent of 27,600 additional 500 MW power
plants. A 500 MW power plant lights 600,000 homes. Electricity is projected to
supply an increasing share of the world’s total energy demand and is the
fastest-growing form of end-use energy worldwide in the mid-term. Growth in
demand for electricity continues to outpace growth in total energy use
throughout the projection.
Management
believes the challenges in meeting this growing demand are exacerbated by
environmental concerns and stringent regulatory environments which make it
increasingly difficult to find suitable sites, obtain permits, and construct
generation, transmission and distribution facilities where they are needed most,
often in densely populated areas. Management believes that the solution to these
issues lie in the more efficient use of the current electric grid driven by the
Smart Grid.
The
Cost of Under-Investment and Grid Deterioration
According
to a Smart Grid study prepared by Litos Strategic Communication for the U.S.
Department of Energy, since 1982, growth in peak demand for electricity has
exceeded transmission growth by almost 25% every year. Yet spending on research
and development is among the lowest among all industries.
According
to the International Energy Agency’s "World Energy Outlook 2008", electric power
infrastructure will require cumulative worldwide investment of over $13.6
trillion (in 2007 dollars) in 2007-2030, or 52% of the total infrastructure
needed. On a national level, and according to the Brattle Group, investment
totaling approximately $1.5 trillion will be required between 2010 and 2030 to
pay for grid infrastructure in the United States.
The
Department of Energy has estimated that while today’s electricity system is
99.97% reliable, it still allows for power outages and interruptions that cost
Americans at least $150 billion each year.
39
An
Evolving Regulatory Framework
The
energy regulatory environment in the US continues to be driven by a need to
utilize the grid more efficiently, to encourage the use of renewables, promote
energy efficiency and reduce the carbon footprint. In addition to historical
legislation already discussed, new legislation is anticipated that will continue
to shape the industry in favor of adopting the Smart Grid. For example, recently
under the American Recovery and Reinvestment Act of 2009 ("Recovery Act") the
Department of Energy announced on June 25, 2009 that it is soliciting
applications for $3.9 billion in grants to support efforts to modernize the
electric grid, allowing for greater integration of renewable energy sources
while increasing the reliability, efficiency and security of the nation’s
transmission and distribution system.
Figure 3:
Renewables Portfolio Standards
Source:
Transforming America's Power Industry: The Investment Challenge 2010-2030, The
Brattle Group, November 2008.
Additionally, state Renewables Portfolio Standards programs to set targets for renewables adoption by different states continue to play an important role in encouraging renewables, growing in number, while existing programs are modified with more stringent targets. In total, 28 states and the District of Columbia now have mandatory Renewable Portfolio Standards "RPS" programs, and at least 4 other States have voluntary renewable energy programs.
Another
critical set of regulations influencing the Smart Grid landscape are the
environmental policies (as recently demonstrated with the Clean Air Act of 2005
and the American Clean Energy and Security Act of 2009 (due to be discussed and
voted on in the Senate). With evidence mounting that sea levels are rising and
climate volatility is increasing at a rapid pace, reducing or offsetting
greenhouse gas emissions is becoming a critical element of energy industry
strategy, resulting in the development of additional regulations for curbing
emissions that significantly affect energy industry operations. Entirely new
markets will be created in response to problems associated with emissions, such
as carbon credits emission trading.
State
(and potentially federal) Renewable Portfolio Standards "RPS" and likely federal
carbon legislation are helping to drive the demand and economics for renewable
development, which subsequently requires significant transmission
investment. There is a need to connect remotely located renewable
resources, particularly wind, to the grid and provide such power access to
high-power price and/or renewable constrained load centers.
40
The need
for significant investment in transmission to tap the nation’s wind energy
potential and improved the overall efficiency of the grid is highlighted in the
favorable treatment of renewable energy and the Smart Grid in Recovery Act. The
bill provides $16.8 billion in direct spending for renewable energy and energy
efficiency programs over the next ten years. The bill also provides $11 billion
to modernize the nation's electricity grid with smart grid technology. This
includes $4.5 billion for the DOE Office of Electricity Delivery and Energy
Reliability for activities to modernize the nation's electrical grid, integrate
demand response equipment and implement smart grid technologies. In addition,
$6.5 billion is provided for two federal power marketing administrations to
assist with financing the construction, acquisition, and replacement of their
transmission systems.
Building
a Smarter Grid
For
roughly a century, the developed world has delivered electric power using the
same basic four-step approach described in the previous section and depicted in
Figure 1. The elements of this traditional grid critical to its
operations have included analog electromechanical devices used to capture and
store data; one-way communication system to facilitate communication between the
utility and the customer and by human labor to monitor and control the grid. In
much the same way that technological advances in microprocessors, power
electronics and the internet revolutionized the telecommunications industry as
it transitioned from analog to digital, dramatically improving our communication
capabilities, these similar technological advances are continuously transforming
the traditional grid into a “Smarter Grid” significantly improving its
capabilities. The heart of an intelligently managed grid, in our
view, is the smart meter. While automated meter reading originated as a means
for utilities to save money and speed up the billing process, management
believes metering technology is the a key building block to the Smart Grid. The
smart meter generates data to facilitate communication between the end-user
customer and the utility.
Figure 4:
Illustrates how the current grid is evolving into a smarter grid capable of
functioning more efficiently
Source:
“The Electricity Economy, New Opportunities from the Transformation of the
Electric Power Sector”, Global Environment Fund, August 2008.
With the
aid of concepts proven in telecommunications, computing and the internet, the
“smarter grid” uses digital electronic systems and devices to capture, store and
analyze data into useful information; advanced control systems capable of
automating certain functions of the grid; and communications platforms capable
of two way communications among the various components of the
grid. As a result, for example, a system operator may be able to
sense, predict, diagnose and remotely mitigate issues in the grid that might
previously have caused an outage or blackout, thereby increasing reliability of
the grid. In another instance, the “smarter grid” might introduce a renewable
source of generation in response to higher demand by a customer in real time or
re-route power in a congested part of the grid to avoid a blackout.
41
Figure 5:
The modernized grid lies at the intersection of telecommunications, computing
and internet technologies.
Source: “The
Emerging Smart Grid, Investment and Entrepreneurial Potential in the Electric
Power Grid of the Future”, Global Environment Fund, October 2005.
In
particular, Advanced Metering Infrastructure Meter Data Management, an
important capability of the Smart Grid, is the technology platform or
architecture that enables the communication and interoperability of the various
devices and participants of the Smart Grid to collect, analyze, transfer and
interpret data and convert it into useful information. AMI allows utilities the
ability to offer time-of-use rates, critical peak pricing, and peak load
reduction, and to perform flexible demand response. To facilitate these
capabilities, data management and warehousing capabilities and hardware and
software platforms are critical for a Smart Grid infrastructure. Growth in these
services is a function of smart meter penetration. As indicated in Figure 6,
smart meter penetration in the USA was 4.7% in 2008.
42
Figure 6:
United States 2008 penetration of advanced metering
Source:
2008 FERC Survey
From a
macro perspective, AMI/MDM technology is part of the overall umbrella of
demand-side management programs, and supports the build out of a Smart
Grid, whereby utilities can communicate with customers (households as well as
commercial enterprises) in real time via their network on the power grid.
Potential smart-grid applications include, but are not limited to, thermal
management, such as food storage (refrigerators and freezers) and heating,
ventilating, and air conditioning systems, automated lighting system management,
the operation of home appliances, and the charging of electronics. On a
very broad level, the efficient and economic dispatch of increasingly expensive
resources and the reduction of environmental emissions are two very significant
societal and environmental benefits of AMI/MDM and smart meters.
Overall,
key elements of the Smart Grid made possible by technological advances include
ability to introduce clean energy sources into the grid; to transmit, store and
analyze data from the grid; to communicate information between all segments of
the grid; to automate certain functions of the grid using advanced control
systems and devices; and to reduce the carbon footprint using various products,
services and processes. A majority of the products and services that are used to
deploy Smart Grid solutions can be categorized under the following: engineering
solutions, data warehousing and information technology solutions, consulting and
advisory services. Within the electric power industry, these elements
drive most product and service offerings of companies that participate in the
Smart Grid sector, such as our company.
It is
estimated by Litos Strategic Communication for the U.S. Department of Energy
that Smart Grid enhancements will ease congestion and increase utilization (of
full capacity), sending 50% to 300% more electricity through existing energy
corridors.
The
Market Opportunity
A
confluence of various factors including; (1) rising energy demand, (2)
regulatory, environmental, construction cost constraints on upgrading the
current electric grid and building new power plants, and (3) technological
advances in telecommunications, computing and internet technology, have resulted
in the Smart Grid presenting a unique and cost effective solution to meeting
rising energy demands while reducing the carbon footprint. We believe our
Company is uniquely positioned and qualified to participate in the markets which
will serve the clean energy and Smart Grid sector. Our current consulting
product/services offerings, our management team’s experience and expertise in
the sector and our extensive knowledge of the Smart Grid opportunities uniquely
positions us to expand our product offerings into engineering services, data and
information technology, and other areas relevant to the clean energy and Smart
Grid sector.
Competition
We
operate in a highly competitive and fragmented marketplace and compete against a
number of firms in each of our key markets. A substantial number of
these firms have significantly greater infrastructure and financial resources
than our company. We divide our competitive universe into three segments: (1)
research and consulting services; (2) technology services and solutions; and (3)
engineering services and solutions.
Some of
our principal competitors in the consulting universe include mid-size, specialty
consulting firms such as Navigant Consulting, Inc., FTI Consulting, Inc., and
ICF International, Inc – each of which have specific utility-focused consulting
practices. In addition, within our key energy and power markets, we have
numerous smaller competitors, many of which have narrower service offerings and
serve niche markets.
43
Within
the technology services and solutions segment, we will compete against firms
such as American Superconductor Corp., Esco Technologies Inc., Badger Meter,
Inc., Echelon Corp., EnerNOC, Inc., and smaller vendors such as Orion Energy
Systems, Inc. and Composite Technology Corp. Each of the aforementioned is
providing utilities with clean and intelligent energy technology solutions.
Firms such as Comverge Inc., Itron Inc., Echelon Corp., Neteeza Corp., Teradata
Corp., and Digi International Inc. are in the market to primarily provide
enterprise-class analytic tools and services. Other companies such as Quanta
Services provide engineering services to enable the Smart Grid.
Finally,
some of our competitors such as IBM Corp. and Electronic Data Systems, an
Hewlett- Packard company are significantly larger than us and have greater
access to resources and stronger brand recognition than we do. On some of our
past projects, competitors including IBM and EDS, have also been our customers.
We
consider the principal competitive factors in our market to be client
relationships, proprietary products or data, reputation and past performance of
the firm, client references, technical knowledge and industry expertise of
employees, proprietary products or data, quality of services and solutions,
scope of service offerings and pricing.
Employees
As of
February 2, 2010 , we have 4 full time employees who
work in our corporate headquarters. Utilipoint directly employs 19 full time
staff members, including a professional staff of 16, and an administrative staff
of 3, each of whom support our seven practice areas.
DESCRIPTION
OF PROPERTIES
Our
subsidiary, Utilipoint’s corporate headquarters is located in Albuquerque, New
Mexico in approximately 2,400 square feet of office space under a lease that
expires in January 2011 at a cost of $3,503 per month. Additionally,
Utilipoint occupies satellite offices in Tulsa, Oklahoma and Sugar Land, Texas
in approximately 436 and 200
square feet of office space, respectively. The Tulsa and Sugar
Land offices are under a month-to-month lease at a cost of $600 per month and a
lease that expires in October 2010 at a cost of $935
per month, respectively. Utilipoint intends to extend each of
the foregoing leases. Utilipoint’s European headquarters is located
in Brno, Czech Republic in approximately 1,000 square feet of office space. We
believe that our current premises are sufficient to handle our activities for
the near future.
LEGAL
PROCEEDINGS
Presently,
there are no material pending legal proceedings to which the Company is a party
or as to which any of the Company’s property is subject, and no such proceedings
are known to the Company to be threatened or contemplated against
it.
MARKET
FOR COMMON STOCK
AND
RELATED SHAREHOLDER MATTERS
OTC
Bulletin Board Considerations
There is
no public market for our securities. On or before the date of this prospectus we
intend to have our common stock quoted for trading on the FINRA OTC Bulletin
Board. There can be no assurance that our common stock will ever be quoted on a
quotation service or a stock exchange or that any market for our securities will
develop.
Holders
As of
February 2, 2010 , the Company had 22 stockholders of
record.
Transfer
Agent
The
Company's registrar and transfer agent is Continental Stock Transfer & Trust
Company.
Dividend
Policy
We
have never declared or paid any cash dividends on its common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
44
Securities
Authorized for Issuance under Equity Compensation Plans
On July
27, 2009, the Board approved the Midas Medici Group Holdings, Inc. Stock Award
and Incentive Plan (the “MMGH Plan”). The purpose of the MMGH Plan is to give us
a competitive advantage in attracting, retaining, and motivating officers,
employees, directors, and consultants and to provide us with an incentive
plan that gives officers, employees, directors, and consultants financial
incentives directly linked to shareholder value.
The
maximum number of shares that may be issued under the Plan is 650,000. However
for the period commencing January 1, 2010, the maximum number of shares issuable
under the Plan shall be equal to 20% of the issued and outstanding shares of the
Company’s common stock on a fully diluted basis but shall not be less than
650,000. Notwithstanding the foregoing, for a period of one year from the
date of this prospectus, the total number of options issued under the Plan shall
be limited to 15%. Pursuant to the Plan, incentive stock options or
non-qualified options to purchase shares of common stock may be
issued. The plan may be administered by our board of directors or by
a committee to which administration of the Plan, or part of the Plan, may be
delegated by our board of directors. Options granted under the Plan are not
generally transferable by the optionee except by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order, and are
exercisable during the lifetime of the optionee only by such optionee. Options
granted under the plan vest in such increments as is determined by our board of
directors or designated committee. To the extent that options are vested, they
must be exercised within a maximum of thirty days of the end of the optionee's
status as an employee, director or consultant, or within a maximum of 12 months
after such optionee's termination or by death or disability, but in no event
later than the expiration of the option term. The exercise price of all stock
options granted under the plan will be determined by our board of directors or
designated committee. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of our outstanding capital
stock, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date.
As of February 2 ,
2010 , options to purchase an aggregate of 472,097 shares
of common stock of the Company were granted under the MMGH Plan with a
weighted average exercise price of $2.42. In 2009, the Company took a
compensation charge of $150,913 to recognize the opportunity cost of the 4,900
Utilipoint stock options valued at a fair market price of $30.80 each.
The
following table shows information with respect to each equity compensation plan
under which our common stock is authorized for issuance at December 31,
2009:
Plan
category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for future issuance under equity compensation plans (excluding
securities reflected in column (a))
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
-0-
|
-0-
|
-0-
|
Equity
compensation plans not approved by security holders
|
472,097
|
$2.42
|
177,903
|
Total
|
472,097
|
$2.42
|
177,903
|
45
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth the names and ages of our directors and executive
officers, and their positions with us:
Name
|
Age
|
Position
|
|
Nana
Baffour
|
37
|
CEO,
Co-Executive Chairman, Director and CEO of Utilipoint
|
|
Johnson
M. Kachidza
|
43
|
CFO,
President, Co-Executive Chairman and Director
|
|
Frank
Asante-Kissi
|
38
|
Vice-President
and Chief Administrative Officer
|
|
Ken
Globerman
|
40
|
Senior
Vice-President
|
|
David
Steele
|
54
|
President
of Utilipoint
|
|
Stephen
Schweich
|
50
|
Director
|
|
Frank
Henson
|
38
|
Director
|
Directors
and Executive Officers
Nana
Baffour, CEO, Co-Executive Chairman and Director
Mr.
Baffour, 37, was appointed to serve as our President and a Director in May 2009.
On July 16, 2009, Mr. Baffour was appointed as our CEO and Co-Executive
Chairman. Since 2004, Mr. Baffour has been a Managing Principal and Co-Founder
of Knox Lawrence International, LLC (“KLI”) an energy services investment
company that has completed over $600 million in acquisitions to date. He is
currently Executive Chairman of Consonus Technologies, Inc. a technology company
he co-founded in 2005 and grew from start-up to over $100 million in revenues.
He has led acquisitions, integrations, and held operating roles including
executive chairman, president, and CEO for different energy services companies
during his tenure at KLI. Mr. Baffour currently serves as Board Member of
Dearborn Mid-West Conveyor Co. and Utilipoint International as well as Chair of
the Advisory Board of the University of Utah Opportunity Scholars
Program.
From 2000
to 2004, Mr. Baffour was an investment banker at Credit Suisse First Boston in
Europe and the US, where he was directly involved in billions of dollars of
M&A and financing transactions for utilities, including clean energy
companies and did the first capital markets wind financing transaction. Mr.
Baffour started his career in finance as a Credit Analyst for CIT Group from
1996 to 1998 and was an equity portfolio analyst at Standard and Poor’s from
1998 to 2000. Mr. Baffour received his MBA from New York University’s Stern
School of Business, a Master of Science in Economics from University of North
Carolina at Charlotte and a Bachelor of Arts Degree in Economics from Lawrence
University. Mr. Baffour is a Chartered Financial Analyst.
Johnson
Kachidza, Chief Financial Officer, President, Co-Executive Chairman, Secretary
and Director
Mr.
Kachidza, 43, was appointed to serve as our Secretary and a Director in May
2009. On July 16, 2009, Mr. Kachidza was appointed as President and Co-Executive
Chairman. Effective November 2, 2009, Mr. Kachidza was appointed as our
Chief Financial Officer. Since 2002, Mr. Kachidza has been a Managing Principal
and Co-Founder of Knox Lawrence International, LLC (“KLI”), an energy services
investment company that has completed over $600 million in acquisitions to date.
He is currently Executive Chairman of Dearborn Midwest Conveyor Co., Inc., a
provider of pollution control systems to the power and automotive industries.
During his tenure at KLI, Mr. Kachidza co-founded Consonus Technologies, Inc. in
2005 and has led acquisitions, integrations, and held operating positions,
including Executive Chairman, President, and CEO for different energy services
companies. Mr. Kachidza currently serves as a board member of Consonus
Technologies, Utilipoint International and Transactis, Inc. He is also on the
Board of Directors of Shared Interest, a non-profit organization focused on
micro-lending.
From 1997
to 2001, Mr. Kachidza was an investment banker at Merrill Lynch and JP Morgan
Chase, where he was directly involved in billions of dollars of M&A and debt
and equity financing transactions in the energy sector. Mr. Kachidza began his
career as a project engineer at General Electric from 1991 to 1995 and holds US
patent #5686795 for an innovative fluorescent lamp design. Mr. Kachidza received
his MBA from University of Chicago Booth School of Business, a Master of Science
in Materials Engineering from University of Illinois at Urbana-Champaign and a
Bachelor of Arts Degree in Chemistry from Knox College.
46
Frank
Asante-Kissi, Chief Administrative Officer
Mr.
Asante-Kissi, was appointed to serve as our Vice-President in May 2009. In July
2009 Mr. Asante-Kissi was appointed as Chief Administrative Officer. Since March
2008, Mr. Asante-Kissi has served as Chief Operating Officer and as a consultant
since March 2003 of Knox Lawrence International, an energy services investment
company that has completed over $600 million in acquisitions to date since March
2008.
Mr.
Asante-Kissi has over 10 years experience in business performance management,
process improvement and operational efficiency. Mr. Asante-Kissi was
Senior Business Analyst at Citigroup from January 2002 through March 2008. While
at Citigroup, Mr. Asante-Kissi led several process improvement and performance
management initiatives including industry benchmarking. Mr.
Asante-Kissi began his career as a software developer prior to joining
Citigroup.
Mr.
Asante-Kissi received his MBA from Rensselaer Polytechnic Institute’s Lally
School of Management and Technology (RPI) and a Bachelor of Arts Degree in
Mathematics and Computer Science from Lawrence University.
Ken
Globerman, Senior Vice-President
Mr.
Globerman was appointed to serve as our Senior Vice President in July
2009. Since 2003, Mr. Globerman has served as Vice President of Knox
Lawrence International, an energy services investment company that has completed
over $600 million in acquisitions to date. Mr. Globerman serves as a Board
observer for Consonus Technologies, Dearborn Mid-West Conveyor Co.,Utilipoint
International and Transactis, Inc., working with executive management to oversee
business operations, develop business strategy, execute external financings and
mergers & acquisitions. Mr. Globerman also co-founded and serves
as Executive Chairman of KLI’s Africa Business Plan Competition, an annual MBA
focused competition geared towards encouraging entrepreneurship to support
development in Africa. Prior to joining KLI, Mr. Globerman spent more
than 6 years at WPP’s media investment firm, MediaEdge (former division of Young
& Rubicam Advertising). As Associate Media Research & Planning Director
for MediaEdge, he was responsible for managing Fortune 500 media client
relationships and business development in the consumer packaged goods, media and
pharmaceutical sectors. He also served as an integral member of the firm’s new
business development team and actively participated in the formation of the
firm’s online media planning division, DigitalEdge. Mr. Globerman
received a MBA in Finance and Management from New York University’s Stern School
of Business, where he was elected Stern Scholar, Research Fellow and served as
Teaching Assistant to Professor Aswath Damodaran of Stern’s Finance
Department. Mr. Globerman also holds a BS in Applied Mathematics /
Operations Research from Carnegie Mellon University.
David
Steele – President of Utilipoint
Effective
August 12, 2009, Dave Steele was appointed President of Utilipoint. Mr. Steele
has served as Senior Managing Director and Chief Operation Officer of UiliPoint
since May 2009. Mr. Steele has extensive executive experience in both
growth and turnaround assignments. With over 30 years of experience in the
energy space, he has held broad officer roles in both public utility and service
organizations. His international experience includes Executive Vice President
& General Manager; North America for Vertex Data Science, a UK based
business process outsourcing company from May 2007 to May
2008. In this role he managed over 1,200 employees in the US and
Canada leading a growth and turnaround effort funded by a New York based
private-equity consortium. Steele led a $45M direct cost-out initiative,
developed and led the execution of the first comprehensive sales & marketing
plan for North America, and established new key relationships with industry
partners and clients. Prior to this, he was Vice Chairman and CEO of
IEI Financial Services from April 2004 to May 2007. In this role, he
led a 40% per annum growth for three consecutive years, and a full operational
turnaround while becoming the 27th J.D. Power and Associates certified Customer
Operations Center in the US, and the first business process outsourcer to be
certified.
Mr.
Steele is an award winning faculty member at Indiana University’s Kelley School
of Business where he has taught for 12 years. Currently, he is lecturing a
course in entrepreneurship. Mr. Steele holds a B.S. in Business
Economics and Public Policy from Indiana University.
Stephen
Schweich – Director
Stephen
Schweich was appointed to our Board of Directors in July 2009. Mr. Schweich is a
Managing Director of Mooreland Partners, an investment banking advisory firm
with offices in London, New York and San Francisco. In 1996, Mr. Schweich
established the European division of the San Francisco-based investment
bank Robertson
Stephens International (RSIL). Mr. Schweich
served as CEO of RSIL where he was responsible for the firm’s investment banking
and equity sales & trading operations with offices in London, Munich and Tel
Aviv. During the 1996-2002 period, Stephen was involved in over 40 equity
capital markets transactions in Europe. During 1998-2001, Mr. Schweich served on
the Board of Directors of EASDAQ, the pan-European stock exchange based in
Brussels. Prior to 1996, Mr. Schweich was a sell-side equity research analyst
for over 11 years. From 1987 to 1993, Mr. Schweich was a Senior Analyst with
Alex Brown & Sons in Baltimore, where he
founded the firm’s environmental practice, and became one of the leading waste
services and pollution control technology analysts in the US. Mr. Schweich
covered a broad range of related sectors including: hazardous & solid waste
services, clean energy (geothermal, solar and wind power), water &
wastewater treatment, site remediation (asbestos, groundwater, soil), air
pollution control, recycling (metal, plastic, solid waste), and industrial
services.
Mr.
Schweich began his business career in New York with Booz Allen & Hamilton,
the management consulting firm.
Mr.
Schweich is currently a Director of Credo Capital LLC, a US equity fund
management company, and an Advisory Board member at Cypak AB (Sweden) and Global
Bay Mobile Technologies (US). Mr. Schweich is a
graduate of Amherst College (1981) and the Harvard
Business School (1985), and received a
CEP degree from L’Institut d’Etudes Politiques de Paris (1980).
Frank
Henson – Director
Frank
Henson was appointed to our Board of Directors in November 2009. Mr. Henson is a
Managing Director in the Institutional Sales Group at Cohen & Company
Securities LLC, an institutional broker-dealer focused on debt securities. Prior
to joining Cohen & Company Securities LLC, Mr. Henson held a position of
Managing Director in the Corporate Bond Research Department at Bear Stearns,
where he covered retail and consumer product companies from June 2005
to June 2008. In 2006 and 2007, Mr. Henson was recognized by Institutional
Investor for his research on retail companies. Prior to working at
Bear Stearns, Mr. Henson worked at Morgan Stanley with roles in the Corporate
Bond Research and Investment Banking Departments. From August 2001 to May
2005, Mr. Henson worked in Morgan Stanley’s Corporate Bond Research Department,
covering retail and consumer product companies and from 1995 to 1998, Mr. Henson
worked in Morgan Stanley’s Investment Banking Department, implementing numerous
initial and secondary public equity offerings in New York, as well as M&A
transactions in Southeast Asia.
Mr.
Henson holds an MBA from Columbia Business School and a Bachelor of Arts Degree
from Rutgers College.
47
Other
Key Employees
Robert
C. Bellemare, P.E. – Chief Operating Officer of Utilipoint
Robert
Bellemare joined Utilipoint in 2002. With 20 years of experience in the
utility business, Mr. Bellemare advises clients on asset valuation, financial
modeling, strategic planning, public issues management, and pricing products and
solutions. He previously worked for Fortune 500 utilities in a variety of
capacities including managing director of energy services, director of market
research, wholesale trading and operations, research and development,
distribution engineering and power plant engineering. Mr. Bellemare was co-lead
of the unregulated business merger integration team for the American Electric
Power South West Corporation merger, which formed the largest utility of its
time. Mr. Bellemare is frequently quoted in the press and makes public
presentations on energy issues, with recent forums including CNBC, the World
Energy Council, Energy Risk Mutual and industry regulators. Mr. Bellemare is a
registered professional engineer and holds a M.S. in Electric Power Engineering
from the Georgia Institute of Technology. Mr. Bellemare also holds a BSEE with
Business minor from Kettering University.
Peter
Shaw –Managing Director of the Intelligent Project, LLC and Utilipoint
International, LLC.
Peter
Shaw has served as Managing Director of IP since May 2009. Mr. Shaw has 20 years
of experience advising energy companies on integrated resource planning, new
product development and customer strategy. Prior to Utilipoint, Mr. Shaw served
as Director at Navigant Consulting from 1998 to March, 2009. Mr. Shaw
has assisted numerous companies in developing business plans and launching new
lines of business selling energy commodities, energy services and related
outsource solutions. Mr. Shaw is a recognized thought leader in the development
of utility “Smart Grid” infrastructures, and leads two industry consortiums
focused on integrating energy efficiency, renewable and distributed energy
resources into utility marketing and customer management operations. Mr. Shaw’s
Board work relating to green energy and alternative fuels includes The Energy
Cooperative Association of Pennsylvania and the Sustainable Development Fund.
Mr. Shaw holds a M.S. in Energy Policy and a Certificate in Economic Development
from the University of Pennsylvania. Mr. Shaw also holds a B.A in International
Studies from the Bucknell University.
Larry
Robinson - Managing Director and Publisher of Utilipoint
Larry
Robinson joined UtiliPoint in November 2009. Mr. Robinson has
responsibility for all external communication channels, product and service
positioning, research direction, thought leadership and knowledge management, as
well as editor of publications. He has over 20 years experience in the
marketing/ publishing industry including consumer and business publishing
with steady progression of senior level marketing, communication and
publishing roles. Mr. Robinson holds a BS in Journalism from the University of
Colorado.
Gary
M. Vasey, Ph.D. – Managing Director, Europe & Commodity Point
Dr. Gary
M. Vasey has been with Utilipoint since 2003 when Utilipoint acquired VasMark
where Dr. Vasey served as President. VasMark Group offered a unique combination
of marketing and analyst services to energy trading vendors and was viewed as
the leader in understanding that software market. Currently Dr. Vasey manages
Utilipoint's European practice from our office in the Czech Republic and also
heads up Utilipoint’s CommodityPoint Division. CommodityPoint is the leading
provider of analyst services around commodity trading and risk management and
other technologies providing a range of services to end users, software vendors,
agencies and consulting firms. Dr. Vasey has over 24-years experience in the
energy and utilities industry which has included senior roles at Cap Gemini
Sogeti, Sybase, Inc., TransEnergy Management and BP. Dr. Vasey is a noted expert
on the energy trading, transaction and risk management software industry. Gary
holds a B.Sc. (Hons.) degree in Geological Sciences from the University of Aston
in Birmingham, England and a Ph.D. in Geology from the University of
Strathclyde, Scotland.
48
Senior
Advisor
Spencer Abraham – SeniorAdvisor
Spencer
Abraham was appointed as our senior advisor in November 2009. Mr. Abraham is the
former United States Secretary of Energy having been appointed by President Bush
as the tenth and longest-serving Energy Secretary in U.S. history. As Secretary,
he led a federal department with a $23 billion budget and over 100,000 federal
and contractor employees. Since September 2005, he has been chairman and chief
executive officer of The Abraham Group LLC, an international strategic
consulting firm based in Washington D.C. In addition, he serves as
non-executive chairman of AREVA, Inc. the North American subsidiary of the
French-owned nuclear energy company, and on the Board of Directors of Occidental
Petroleum (NYSE:OXY). Prior to being Secretary of Energy, Spencer Abraham served
as a U.S. Senator from Michigan for six years. In the Senate, he was
a member of the Senate Commerce, Judiciary and Budget Committees and served as
chairman of the Senate Immigration Subcommittee and the Senate Commerce
Subcommittee on Manufacturing and Competitiveness.
Secretary
Abraham is a graduate of Michigan State University and Harvard Law
School.
Involvement
in Certain Legal Proceedings
To our
knowledge, during the past five years, none of our directors, executive
officers, promoters, control persons, or nominees has been:
·
|
the
subject of any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time;
|
·
|
convicted
in a criminal proceeding or is subject to a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
|
·
|
subject
to any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
·
|
found
by a court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities
law.
|
Code
of Business Conduct and Ethics
We have
adopted a Code of Business Conduct and Ethics to provide guiding principles to
all of our employees, including our principal executive officer, principal
financial officer and persons performing similar functions. Our Code of Business
Conduct and Ethics does not cover every issue that may arise, but it sets out
basic principles to guide our employees and provides that all of our employees
must conduct themselves accordingly and seek to avoid even the appearance of
improper behavior. Any employee who violates our Code of Business Conduct and
Ethics will be subject to disciplinary action, up to and including termination
of his or her employment. The Company will provide a copy of the Code
of Business Conduct and Ethics to any person , without charge, upon request to
Frank Asante-Kissi, Chief Administrative Officer, Midas Medici Group Holdings,
Inc., 445 Park Avenue, 20th Floor, New York, NY
10022.
Director
Compensation
All
directors are reimbursed for their reasonable out-of-pocket expenses incurred in
connection with their duties to us. Currently, no compensation is paid to our
directors for services rendered to us as directors. However, at the closing of
the merger, Stephen Schweich, a director, was awarded options to purchase 10,000
shares of the Company’s common stock at an exercise price of $6.00 per
share.
49
EXECUTIVE
COMPENSATION
The table
below sets forth, for the last two fiscal years, the compensation earned by each
person acting as our Principal Executive Officer, Principal Financial Officer
and our other most highly compensated executive officers whose total annual
compensation exceeded $100,000 (together, the “Named Executive
Officers”).
Summary
compensation table
Name
and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation (#)
|
Non-Qualified
Deferred Compensation Earnings ($)
|
All
Other Compensation ($)
|
Total
($)
|
||
Nana
Baffour
|
2009
|
57,293
|
0
|
0
|
129,046
|
0
|
0
|
0
|
186,339
|
||
CEO
and Co-Executive Chairman (1)
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||
Johnson Kachidza
|
2009
|
57,293
|
0
|
0
|
129,046
|
0
|
0
|
0
|
186,339
|
||
CFO,
President and Co-Executive Chairman (2)
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||
(1)
Effective May 15, 2009, Mr. Baffour was appointed as President. Subsequently on
July 16, 2009, Mr. Baffour was appointed CEO, and Co-Executive
Chairman
(2)
Effective May 15, 2009, Mr. Kachidza was appointed as Secretary. Subsequently on
July 16, 2009, Mr. Kachidza was appointed President and Co-Executive Chairman.
In addition, on November 2, 2009, Mr. Kachidza was appointed as Chief Financial
Officer.
Employment
Agreements
Effective
July 16, 2009, we entered into employment agreements with Nana Baffour and
Johnson Kachidza which agreements contain the same terms and provisions. The
agreements provide for an initial term of five years which shall be
automatically extended for successive one year periods unless terminated.
Pursuant to the employment agreements Messrs. Baffour and Kachidza will devote
at least 65% of their time to the Company’s business.
The
employment agreements provide for an annual base salary of $125,000 which shall
be increased as follows: (i) to $200,000 on the earlier to occur of the first
anniversary of the agreements or the Company publicly reports consolidated
annual gross revenues of at least $10,000,000, (ii) to $250,000 on the earlier
to occur of the second anniversary of the agreements or the Company publicly
reports consolidated annual gross revenues of at least $35,000,000, (iii) to
$350,000 on the earlier to occur of the third anniversary of the
agreements or the Company publicly reports consolidated annual gross revenues of
at least $100,000,000. In addition, the executives will each be
entitled to an annual bonus targeted between 150% to 250% of the base salary
during the first 3 years of the term of the Agreements and thereafter, at a
target to be determined in good faith by the Company’s board of directors. The
executives will also be entitled to grant of bonus stock under the Company’s
incentive stock option, on an annual basis. The Company also agreed to grant
each of the executives options to purchase 100,000 shares of the Company’s stock
as soon as practicable. The options are exercisable at a price of $2.31 and
become fully vested on the first anniversary of the grant.
In the
event of the executives’ death while in our employ, the agreements shall
automatically terminate and any unvested equity compensation shall vest
immediately and any vested warrants may be exercised on the earlier of the
warrant’s expiration or 18 months after the death. In the event of the
executives death or if the agreement is terminated due to a disability or for
cause (as defined in the agreements), any unpaid compensation, prorata bonus or
bonus options earned and any amounts owed to the executives shall be paid by us.
In addition, if the agreements are terminated due to the disability of the
executive, any unvested equity compensation shall vest immediately and any
vested warrants may be exercised on the earlier of the warrant’s expiration or
18 months after such termination. In the event the executive’s employment is
terminated without cause, the executives shall be entitled to receive, in a lump
sum payment, the base salary, the maximum bonus and options that would have been
paid to the executives if the agreements had not been terminated or for 12
months, whichever is greater. In addition, any unpaid compensation, pro rata
bonus or bonus options earned and any amounts owed to the executives shall be
paid by us and any unvested equity compensation shall vest immediately and
any vested warrants may be exercised on the earlier of the warrant’s expiration
or 18 months after the termination. In the event of the executives’ resignation
without good reason (as defined in the agreement), or retirement, the executives
shall be entitled to receive any unpaid compensation, pro rata bonus or bonus
options earned and any amounts owed to the executives
As a
method to retain senior management in the event of a change of control, the
agreements also provide that upon the closing of a transaction that constitutes
a “liquidity event”, as such term is defined in the agreements, each executive
shall be entitled to receive a transaction bonus equal to 2.99 times his then
current base salary, provided that he remains employed with the Company on the
closing of such liquidity event, unless his employment is terminated without
cause or he resigns for good reason. Liquidity events include any consolidation
or merger, acquisition of beneficial ownership of more than 50% of the voting
shares of the Company, or any sale, lease or transfer of all or substantially
all of the Company’s assets.
50
The
agreements also contain standard non-solicitation, non-competition and
indemnification clauses.
Outstanding
Equity Awards at Fiscal Year-End Table.
The
following table sets forth information with respect to grants of options to
purchase our common stock to the named executive officers at December 31,
2009.
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number of Shares or Units of Stock That Have Not
Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not
Vested
($)
|
Equity
Incentive
Plan
Awards: Number of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity Incentive
Plan
Awards:
Market
or Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||||
Nana
Baffour
|
0
|
100,000
|
0
|
2.31
|
07/27/2014
|
0
|
0
|
0
|
0
|
|||||||||||
Johnson
Kachidza
|
0
|
100,000
|
0
|
2.31
|
07/27/2014
|
0
|
0
|
0
|
0
|
Director
Compensation
The
following table sets forth with respect to the named directors, compensation
information inclusive of equity awards and payments made for the fiscal year
ended December 31, 2009 in the director's capacity as director.
Name
(1)
|
Fees
Earned or Paid in Cash ($)
|
Stock
Awards ($)
|
Option Awards ($) | Non-Equity Incentive Plan Compensation ($) |
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All Other
Compensation ($)
|
Total
($)
|
|||||||||||||||||||||
Nana
Baffour
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||
Johnson
Kachidza
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||||
Stephen
Schweich
|
0
|
28,199
|
0
|
0
|
0
|
0
|
28,199
|
|||||||||||||||||||||
Frank
Henson
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
(1)
Effective May 15, 2009, Mr. Baffour was appointed to the Board. Effective May
30, 2009, Mr. Kachidza was
appointed to the Board. Mr. Schweich was appointed to the Board on July 29,
2009. Mr. Henson was appointed to the Board on November 2,
2009.
51
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of our
common stock as of February 2, 2010 and as
adjusted to reflect the sale of our common stock included in the shares offered
by this prospectus (assuming the individuals listed do not purchase shares in
this offering), by:
·
|
each
person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock;
|
·
|
each
of our officers and directors; and
|
·
|
all
our officers and directors as a
group.
|
Based on
information available to us, all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them, unless otherwise indicated. Beneficial ownership is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. In computing the number of shares beneficially owned by a person or a
group and the percentage ownership of that person or group, shares of our common
stock subject to options or warrants currently exercisable or exercisable within
60 days after the date of this prospectus are deemed outstanding, but are
not deemed outstanding for the purpose of computing the percentage of ownership
of any other person. The following table assumes 2,810,516 shares of common stock are outstanding after the
closing of this offering based on the 2,310,516 shares of common stock
outstanding as of the date of this prospectus as calculated above, and no
exercise of the over-allotment option.
Unless
otherwise indicated, the address of each individual named below is the address
of our executive offices in New York, New York.
Amount
and Nature of Beneficial
|
Approximate
Percentage of Outstanding
Common
Stock
|
|||||||||||
Name
and Address of Beneficial owner
|
Ownership
|
Before
Offering
|
After
Offering (1)
|
|||||||||
Nana
Baffour (2)
|
1,243,143
|
53.8
|
%
|
44.2
|
%
|
|||||||
Johnson
M. Kachidza (3)
|
1,243,143
|
53.8
|
%
|
44.2
|
%
|
|||||||
Frank
Asante-Kissi (4)
|
65,305
|
2.8
|
%
|
2.3
|
%
|
|||||||
Stephen
Schweich
|
80,000
|
3.5
|
%
|
2.8
|
%
|
|||||||
Frank
Henson
|
0
|
0
|
0
|
|||||||||
UTP
International, LLC (5)
|
687,922
|
29.8
|
%
|
24.5
|
%
|
|||||||
Knox
Lawrence International, LLC (6)
|
201,522
|
8.7
|
%
|
7.2
|
%
|
|||||||
B.N.
Bahadur (7)
|
||||||||||||
c/o
BKK, Ltd. 400 Galleria Office Centre, Suite 400, Southfield, MI
48034
|
166,876
|
7.2
|
%
|
5.9
|
%
|
|||||||
David
Steele (8)
|
9,589
|
*
|
*
|
|||||||||
All
directors and executive officers as a group (6
persons)
|
1,724,568
|
74.6
|
%
|
61.4
|
%
|
|||||||
*
Less than 1%
|
(1)
|
Excludes
up to 75,000 shares of common stock that may
be sold by us to the underwriters to cover over-allotments and 25,000 shares that may be acquired by the
underwriters upon exercise of the warrants issued to them in
connection with this offering.
|
|
(2)
|
Includes
(a) 201,522 shares held by Knox Lawrence International, LLC, (b) 687,922
shares held by UTP International, LLC , (c) 27,168 shares underlying
an option held by KLI IP Holding, Inc., to purchase shares of
the Company issued at the closing of the acquisition of Utilipoint which
is currently exercisable at a price of $1.56 per share and (d) 326,531
held by Mr. Baffour. Does not include shares underlying an option to
purchase 100,000 shares of common stock of the Company which becomes
vested on July 27, 2010.
|
(3)
|
Includes
(a) 201,522 shares held by Knox Lawrence International, LLC, (b) 687,922
shares held by UTP International, LLC, (c) 27,168 shares underlying
an option held by KLI IP Holding, Inc., to purchase shares of
the Company issued at the closing of the acquisition of Utilipoint which
is currently exercisable at a price of $1.56 per share and (d)
326,531 held by Mr. Kachidza. Does not include shares underlying an option
to purchase 100,000 shares of common stock of the Company which becomes
vested on July 27, 2010.
|
(4)
|
Does
not include shares underlying an option to purchase 20,000 shares of
common stock of the Company which becomes vested on July 27,
2010.
|
(5)
|
Nana
Baffour, our CEO and Johnson Kachidza hold the power to vote and dispose
of the shares of UTP International,
LLC.
|
(6)
|
Nana
Baffour, our CEO and Johnson Kachidza hold the power to vote and dispose
of the shares of Knox Lawrence International.
|
|
(7)
|
Includes
85,243 shares held by The Bahadur Family Foundation, Mr. Bahadur
holds the power to vote and dispose of the shares of The Bahadur
Family Foundation.
|
|
(8)
|
Represents
shares underlying an option to purchase 9,589 shares of common stock of
the Company which are vested. Does not include options to purchase 25,000
shares of the company’s common stock at an exercise price of $6.00 per
share which were granted to Mr. Steele at the closing of the merger on
August 21, 2009, which vest on the first anniversary of the
grant.
|
52
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
I. Effective
July 23, 2007, Utilipoint and Knox Lawrence International, LLC entered into a
management agreement (the “Management Agreement”) pursuant to which Knox
Lawrence International, LLC provides management, consulting and financial
services to Utilipoint for a period of one year with automatic annual renewals
unless terminated by either party. The Management Agreement provides for annual
compensation of $100,000, which payment may be deferred if after such payment
the Company shall not have sufficient liquidity to pay its obligations,
including dividends on its Series A Preferred Stock. Knox Lawrence
International, LLC. directly and indirectly through a subsidiary owns a
controlling interest in Utilipoint. Effective upon completion of the Utilipoint
acquisition, the management agreement was terminated. As at the date of
this prospectus, Utilipoint owes an aggregate of $113,978, in accrued and unpaid
management fees and expenses to Knox Lawrence International, LLC, which will be
repaid out of the net proceeds of this offering. Nana Baffour, our CEO,
and Johnson Kachidza, our President, are the managing principals of Knox
Lawrence International, LLC.
II. Prior
to the change in control of the Company which occurred on May 15, 2009 with the
consummation of the Purchase Agreement between Mondo Management Corp. and Midas
Medici (an entity that changed its name to Midas Medici Group Inc. and was
subsequently dissolved on May 22, 2009), Mondo Management was the sole
shareholder of the Company. Mondo Management acquired 1,000,000 shares of the
Company’s common stock at a purchase price of $.0175 per share, for an aggregate
purchase price of $17,500 and may be deemed to be the Company’s initial
promoter. The former officers, directors, and stockholders of the Company prior
to the consummation of the Purchase Agreement are members of Sichenzia Ross
Friedman Ference LLP, our counsel. Accordingly, the members of Sichenzia Ross
Friedman Ference LLP were our initial promoters.
Effective
May 15, 2009, Midas Medici Group purchased all of the shares of the Company
which was held by Mondo Management, the then sole shareholder of the Company, in
consideration of the aggregate amount of $75,000. Mondo Management retained no
interest in the Company. Upon consummation of the purchase of the shares of
Mondo Management by Midas Medici Group, the officers and directors of Mondo
Management resigned their positions and Nana Baffour was appointed as President
and a Director, Frank Asante-Kissi was appointed Vice-President and Johnson M.
Kachidza was appointed Secretary. Subsequently, on May 30, 2009, Mr. Kachidza
was appointed as a Director. Midas Medici Group upon its dissolution on May 22,
2009 distributed the 1,000,000 shares of the Company to its then existing
stockholders, Nana Baffour, Johnson Kachidza, Frank Asante-Kissi and B.N
Bahadur. Mondo Management did not retain any share ownership after
the change of control.
III. On
January 15, 2009, Utilipoint issued a Senior Subordinated Debenture to Knox
Lawrence International, LLC in the principal amount of $10,000. The Debenture
provides for payment of interest in the amount of 10% per annum and matures on
January 15, 2014. The outstanding balance on the Debenture as of the date hereof
is $10,000. Also, on December 31, 2008, Utilipoint issued a Senior Subordinated
Debenture to Knox Lawrence International, LLC in the principal amount of
$62,500. The Debenture provides for payment of interest in the amount of 10% per
annum. The Debenture matures on December 31, 2013. The outstanding balance on
the Debenture as of February 2, 2010 is $62,500.
Nana Baffour, our CEO, and Johnson Kachidza, our President, are the managing
principals of Knox Lawrence International, LLC.
IV.
On June 30, 2009, the Intelligent Project, LLC issued a promissory note to KLI
IP Holding, Inc. in the amount of $108,969. Interest on this note accrues at an
annual percentage rate of 5%. The note matures on June 30, 2012. This note will
be repaid out of the proceeds of this offering.
V.
On July 1, 2009, in connection with Utilipoint’s acquisition of its 60% owned
subsidiary, The Intelligent Project, LLC (“IP”), Utilipoint entered into the
following agreements:
(A) a
Capital Commitment Agreement (the “Capital Agreement”) pursuant to which
Utilipoint committed to contribute up to $200,000 to IP, as may be requested by
IP, but in no event not in excess of $25,000 in a any single request. The
parties contemplate that the capital contributions under the Capital Agreement
may be satisfied by capital contributions which KLI intends to make to
Utilipoint in the amount of $200,000 and therefore any failure by Utilipoint to
make a capital contribution to IP because it has not received sufficient funds
from KLI will not constitute a default under the Capital
Agreement.
(B) a
Management Services Agreement with IP pursuant to which Utilipoint will provide
management services and provide consultants to assist IP with IP
projects. The services will include, but are not limited
to: (i) assisting in the preparation of annual budgets, (ii)
providing sales, marketing and strategic services, (iii) assisting IP with
complying with reporting requirements under any financing agreements, (iv)
providing legal, human resources, loss prevention and risk management services;
(v) providing receivables collection services, cash management services and
payroll services, (vi) any other service performed or expenses incurred by
UtiliPoint for IP in the ordinary course of business. In addition,
under the Management Service agreement, Utilipoint is authorized to make
payments to creditors of IP on its behalf and to collect receivables on behalf
of IP; provided Utilipoint has assurance that the necessary funds for discharge
of any liability or obligation will be provided by IP.
Management
services will be charged to IP based on the actual expenses incurred by
Utilipoint, and consultants will be charged at the same rate that Utilipoint
charges to subcontract its consultants to third
parties.
Utilipoint
will also pay all salaries and benefits for certain employees of IP who will
also provide services to Utilipoint, which will initially include David Steele
and Peter Shaw. The Management Services Agreement has a two-year
term, and, thereafter, automatically renews for one-year terms. It
may be cancelled by either party on 60 days prior written notice.
(C) an
Agreement to be Bound to the Limited Liability Agreement of IP. The IP LLC
Agreement provides that Net Cash Flow will be distributed as follows: first,
contributed capital will be returned to the members on a pro rata basis (based
on the amount of capital contributed), and, thereafter, Net Cash Flow will be
distributed to the members on a percentage ownership
basis. Utilipoint’s percentage ownership immediately after the
execution of the agreement by Utilipoint will be 60%.
The
Limited Liability Company Agreement also provides that IP will be managed by a
Management Committee, who, after the Utilipoint transaction, initially, will be:
Nana Baffour, Johnson Kachidza, Ken Globerman and David Steele. The
Members have no power or authority to manage the affairs of the
company.
The
Limited Liability Company Agreement further provides for restrictions on the
transfer of Company Interests (only to Permitted Transferees) and provides that
the Members holding a majority of the Company Interests may drag-along the
minority members in the event of a Sale of the Company.
(D) a
Consulting Agreement which provides that KLI IP Holding Inc. will provide
consulting services to Utilipoint in connection with the joint business and
marketing efforts of Utilipoint and IP. The agreement has a term of
24 months and may be terminated by either party upon 90 days advance written
notice. In exchange for its services KLI IP Holding, Inc. will
receive an option to purchase 850 shares of common stock of Utilipoint, which
options were converted at the closing of the Utilipoint Acquisition into options
to purchase 27,168 shares of common stock of Midas Medici, at an exercise price
of $1.56 per share. The options are exercisable for a term of 5
years through August 21, 2014 and are fully vested. If KLI IP Holding, Inc.
terminates the agreement without cause within its first year, any unexercised
options held KLI IP Holding, Inc. will terminate.
(E) a
Revolving Senior Subordinated Debenture which provides that KLI may loan up to
$100,000 to Utilipoint. The debenture has a term of 5 years and pays
interest at a rate of 10% per annum. Accrued interest and unpaid
interest is payable monthly (the parties can agree to mutually defer interest
payments), and the unpaid principal amount is due on the five-year anniversary
of the debenture. The debenture is subordinate to all indebtedness,
liabilities and obligations of Utilipoint to any financial
institution.
(F) a
subscription agreement pursuant to which KLI agreed to purchase up to $100,000
of the common stock of the Company at a per share purchase price of $50.00 per
share for a period of up 2 months through September 1, 2009. KLI did not
purchase any shares under the subscription
agreement.
53
VI. On July 29, 2009,
the Company entered into return to treasury agreements with its
stockholders at that time, Nana Baffour, Johnson Kachidza, Frank
Asante-Kissi and B.N. Bahadur, resulting in the return to treasury of an
aggregate of 425,000 shares of the Company’s common stock which resulted in the
reduction of the Company’s issued and outstanding shares from 1,305,000 to
880,000. The return of shares to treasury was done in proportion to each
stockholder’s ownership interest in the Company with no resulting change
in their percentage ownership of each stockholder.
VII. On August
21, 2009, Midas Medici completed a reverse merger transaction with Utilipoint
International, Inc. (“Utilipoint”), a New Mexico Corporation, which resulted in
Midas Medici being the “legal acquirer” and Utilipoint the “accounting
acquirer”. The merger was effected pursuant to Agreement and Plan of Merger (the
“Merger Agreement”) dated August 10, 2009 by and among the Company, Utilipoint
International, Inc. and Utilipoint Acquisition Co. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which
represented 100% of the then outstanding shares). Further, all outstanding
Utilipoint options were exchanged for 172,597 Midas Medici options in accordance
with the Midas Medici stock option program, adopted on July 27, 2009.
Immediately after the closing of the merger and as of September 30, 2009, an
aggregate of 2,310,516 shares of common stock are issued and outstanding. Hence,
the 1,348,516 shares represented approximately 58% of the outstanding shares of
Midas Medici. The shares of common stock issued in connection with the merger
were not registered with the Securities and Exchange Commission and are
considered to be restricted securities. Knox Lawrence International,
LLC, KLI IP Holding, Inc. and UTP International, LLC, stockholders of
Utilipoint, received an aggregate of 889,444 shares of our common stock and
options to purchase 27,168 shares of our common stock at the closing of the
merger in exchange for 27,828 shares of Utilipoint and 850 options of
Utilipoint. Prior to the merger, Knox Lawrence International, LLC, owned 6,305
shares (14.9%) of Utilipoint of which 4,855 were acquired on July 23, 2007,
1,250 were acquired on December 31, 2008 and 200 were acquired on January 15,
2009. KLI IP Holding, Inc. owned 0 shares or 0% of Utilipoint
and UTP International, LLC owned 21,523 preferred shares (51%) of Utilipoint
which were acquired on July 23, 2007. At the closing of the merger,
the preferred shares
were converted into common shares (51% of Utilipoint) at a ratio of one
preferred share for one common share. In exchange for their
shares of Utilipoint, each of Knox Lawrence International, LLC, KLI IP Holding,
Inc. and UTP International, LLC received, 201,522 shares, 0 shares and 687,922
shares of Midas Medici, respectively, in connection with the acquisition of
Utilipoint by Midas Medici. KLI IP Holding, Inc. received
27,168 options to acquire shares of Midas Medici at the closing of the merger.
Each of KLI IP Holding and UTP International has no operations and their
sole business is their current ownership of our shares acquired at the closing
of the merger. UTP International, LLC is a wholly owned subsidiary of Knox
Lawrence International, LLC. Prior to the merger, Knox Lawrence
International and its affiliates owned an aggregate of 65.9% of Utilipoint and
upon the consummation of the merger owns 38.5% of Midas Medici, which in turn
owns 100% of Utilipoint. Nana Baffour, our CEO and Johnson Kachidza, our
President and CFO are co-founders and Managing Principals of Knox Lawrence
International. Nana
Baffour, our CEO and Johnson Kachidza, our President are the principal
shareholders of Knox Lawrence International, LLC, KLI IP Holding, Inc. and each
own 373.5 membership units or 37.35% of Knox Lawrence International, LLC, 150
shares or 30% of KLI IP Holding, Inc., no membership units or 0% of UTP
International, LLC and have an indirect ownership in UTP International, LLC
through Knox Lawrence International, LLC.
At the
closing of the Merger, we also issued options to purchase 25,000 shares of our
common stock to David Steele, President of Utilipoint and options to purchase
10,000 of our common stock each to Peter Shaw, Managing Director of The
Intelligent Project, LLC ("IP") and Stephen Schweich, our director.
Knox
Lawrence International, LLC and its affiliates have had a close relationship
with Utilipoint through their ownership interests and by virtue of the
involvement of Messrs Baffour and Kachidza, who in addition to serving as our
CEO and President, respectively, are also Managing Members of Knox Lawrence
International, LLC and control KLI IP Holding, Inc. and UTP International,
LLC.
Since the
acquisition of Utilipoint stock by Knox Lawrence International, LLC and its
affiliates in July 2007, Knox Lawrence International, LLC has
provided financing to Utilipoint including:
(i)
|
a
10% $62,500 note due on December 31,
2013
|
(ii)
|
a
10% $10,000 note due on January 15,
2014
|
(iii)
|
a 5% $108,969 promissory
note issued by IP due on June 30, 2012
|
(iv)
|
payment of dividends on
behalf of Utilipoint in the amount of
$178,208
|
(v)
|
deferred management fees to
Knox Lawrence International, LLC in the amount of
$113,978
|
In
addition, a Utilipoint insider, Robert Bellemare, the Chief Operating Officer,
has provided financing to Utilipoint including:
(i)
|
a
$21,309 variable interest rate note which was due on August
20, 2009 but extended through
2010
|
(ii)
|
a
10% $7,500 note due on January 15,
2014
|
The debts
and obligations due to KLI and Robert Bellemare is expected to be paid out
of the proceeds of this offering.
VIII. As
of August 20, 2009, Utilipoint owed $178,208 to Knox Lawrence International, LLC
which represents dividends paid by Knox Lawrence International, LLC on behalf of
Utilipoint. This amount will be repaid to Knox Lawrence International LLC out of
the net proceeds of this offering. Nana
Baffour, our CEO and Johnson Kachidza, our President each own 373.5 membership
units or 37.35% of Knox Lawrence International, LLC.
IX. On October 14,
2009, Midas Medici and UtiliPoint, entered into a Revolving Loan Agreement with
Proficio Bank. Pursuant to the terms of the Loan Agreement, the Lender agreed to
lend us up to $500,000, which amounts will be evidenced by a Senior Secured
Revolving Promissory Note.
The Loan
matures on October 14, 2010, unless earlier accelerated upon the occurrence of
an event of default, as such term is defined in the Loan Agreement. Interest on
the Loan is payable monthly in arrears commencing on November 1, 2009, at a rate
which is equal to the published Wall Street
Journal prime rate plus 2.5%, or a minimum of 6.5%. In the
event of default, as such term is defined in the Loan Agreement, the interest
rate shall bear additional interest of 3%. Pursuant to the terms of
the Loan Agreement, events of default include: (i) our failure to make any
payments due under the Loan within 10 days of the due date, (ii) our failure to
make any required payments on any material obligation for money borrowed or the
Company’s failure to pay its debts as they become due, unless the debts are the
subject of a bona fide dispute; (iii) default under the security agreement or
any other agreement we execute in favor of Proficio; (iv) our breach
of any representation or warranty under the Loan Agreement; (v) our failure to
perform or observe any covenants under the Agreement, which failure continues
for 10 days after written notice from Proficio; (vi) our assignment for the
benefit of our creditors, or taking action with respect to the appointment of a
receiver or custodian for the Company or a substantial part of its business or
the filing of any proceeding under any bankruptcy or similar law or if any such
petition or proceeding has been commenced against us, such petition is not
dismissed within 60 days; (vii) our concealment or removing any of our assets
with the intent to defraud our creditors or making a fraudulent
transfer or while insolvent, permitting a creditor to obtain a lien
on our property, which is not vacated within 30 days.
The Loan
is secured by all of our property, including, all our accounts, inventory,
furniture, fixtures, equipment, leasehold improvements, chattel paper and
general intangibles and all proceeds thereof.
In
connection with the Loan Agreement, we paid an origination fee of 2% or $10,000.
The proceeds of the Loan are to be utilized solely for working capital
purposes. At the closing of the Loan Agreement, we drew $150,000
of the available line of credit from Pacifico Bank.
In
connection with the Loan, in addition to the Loan Agreement, we entered into a
Security Agreement with Proficio and the holders of the senior subordinate
debentures issued by Utilipoint entered into a Subordination and Standstill
Agreement. In addition, Knox Lawrence International, LLC (“KLI”)
issued a comfort letter to Proficio Bank. Nana Baffour, our CEO and
Co-Executive Chairman and Johnson Kachidza, our President,
CFO and Co-Executive Chairman of Midas Medici are key shareholders of
KLI.
Midas Medici believes that each of the foregoing transactions were
completed on terms at least as favorable to Midas Medici or its affiliates as
could have been obtained from unaffiliated third parties, under the same
circumstances. All future material affiliated
transactions and loans or forgiveness of loans will be made or entered into on
terms that are no less
favorable to Midas Medici than those that can be obtained from unaffiliated
third parties and shall be approved by at least two independent directors or a
majority of the independent directors, whichever is greater. Midas
Medici currently has two independent members of the Board of Directors, Stephen
Schweich and Frank Henson. Both of such directors have been appointed
to serve on the audit committee of the Board of Directors and will be required
to approve all further transaction between Midas Medici and any
affiliate. The audit committee will have access to independent legal
counsel at the expense of Midas Medici. Midas Medici will maintain at
least two independent members of the Board Directors in the future.
Each of the foregoing affiliated
transactions was entered into at a time when Midas Medici had only one or no
independent directors. Subsequent to consummation of the foregoing
transactions, each of such transactions has been ratified by Midas Medici’s two
independent directors.
54
UNDERWRITING
AND CONFLICT OF INTEREST
In
accordance with the terms and conditions contained in the underwriting
agreement, we have agreed to sell to the underwriter named below, and each of
the underwriters, for which National Securities Corporation, is acting as
representative, have severally, and not jointly, agreed to purchase on a firm
commitment basis the number of shares of common stock offered in this offering
set forth opposite their respective names below:
Underwriters
|
Number of
Shares
|
National
Securities Corporation
Ardour
Capital Investments, LLC
A copy of
the underwriting agreement will be filed as an exhibit to the registration
statement of which this prospectus forms a part.
The
underwriters have advised us that they propose to offer the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers that are members of the Financial Industry
Regulatory Authority (FINRA), at such price less a concession not in excess
of $_______ per share. The underwriters may allow, and the selected dealers
may reallow, a concession not in excess of $_______ per share to certain brokers
and dealers. After this offering, the offering price and concessions and
discounts to brokers and dealers and other selling terms may from time to time
be changed by the underwriters. These prices should not be considered an
indication of the actual value of our shares and are subject to change as a
result of market conditions and other factors. No variation in those terms will
change the amount of proceeds to be received by us as set forth on the cover
page of this prospectus. In addition, certain of
our affiliates may convert outstanding debt of up to $250,000 in this offering,
pursuant to which they will purchase shares of our common stock at the public
offering price, which will constitute part of the 250,000 shares to be sold in
this offering. The public offering price of the shares was negotiated
between us and the representative of the underwriters.
The
principal factors considered in determining the public offering price of the
shares included:
·
|
the
information in this prospectus and otherwise available to the
underwriters;
|
·
|
the
history and the prospects for the industry in which we will
compete;
|
·
|
our
current financial condition and the prospects for our future cash flows
and earnings;
|
·
|
the
general condition of the economy and the securities markets at the time of
this offering;
|
·
|
the
recent market prices of, and the demand for, publicly-traded securities of
generally comparable companies; and
|
·
|
the
public demand for our securities in this
offering.
|
Over-Allotment
Option
We have
also granted to the underwriters an option, exercisable during the 45-day period
commencing on the date of this prospectus, to purchase from us at the offering
price, less underwriting discounts, up to an aggregate of 75,000 additional shares for the sole purpose of covering
over-allotments, if any. The over-allotment option will only be used to cover
the net syndicate short position resulting from the initial distribution. The
underwriters may exercise that option if the underwriters sell more shares than
the total number set forth in the table above. If any shares underlying the
option are purchased, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table
above.
Commissions
and Discounts
The
following table shows the public offering price, underwriting discount to be
paid by us to the underwriters and the proceeds, before expenses, to us. This
information assumes either no exercise or full exercise by the underwriters of
their over-allotment option.
Per share
|
Without Option
|
With Option
|
||||||||||
Public
offering price
|
$ | 5.00 | $ | 2,500,000 | $ | 2,875,000 | ||||||
Discount
(8%)
|
$ | 0.40 | $ | 200,000 | $ | 230,000 | ||||||
Non-accountable
expense allowance (1%)
|
$ | 0.05 | $ | 25,000 | $ | 28,750 | ||||||
Proceeds
before expenses
|
$ | 4.55 | $ | 2,275,000 | $ | 2,616,250 |
( 1) The
offering expenses after the underwriter’s discount and non-accountable expense
allowance are estimated at $____.
The
Underwriter's representative will receive a warrant to acquire up to 25,000 shares of our common stock at an exercise price
equal to 120% of the offering price to the public in this offering. The warrant
is exercisable no more than five years from the effective date of the offering.
The underwriter does not have (a) more than one demand registration right at the
issuer's expense; (b) a demand registration right with a duration of more than
five years from the date of effectiveness or the commencement of sales of the
public offering; (c) a piggyback registration right with a duration of more than
seven years from the date of effectiveness or the commencement of sales of the
public offering; (d) anti-dilution terms that allow the underwriter and related
persons to receive more shares or to exercise at a lower price than originally
agreed upon at the time of the public offering, when the public shareholders
have not been proportionally affected by a stock split, stock dividend, or other
similar event; or (e) anti-dilution terms that allow the underwriter and related
persons to receive or accrue cash dividends prior to the exercise or conversion
of the security. Except as
permitted by FINRA rules, the warrant shall not be sold during the
offering, or sold, transferred, assigned, pledged, or hypothecated, or be the
subject of any hedging, short sale, derivative, put, or call transaction that
would result in the effective economic disposition of the securities by any
person for a period of 180 days immediately following the date of effectiveness
or commencement of sales of the public offering,
55
Lock-Up
Agreements
We have
agreed not to permit or cause a public sale or public offering of any of our
securities (in any manner, including pursuant to Rule 144 under the
Securities Act of 1933, as owned nominally or beneficially by the
Company’s officers, directors and shareholders owning five percent (5%) or more
of the outstanding shares of Common Stock for a period of one hundred and eighty
(180) days following the effective date of the registration statement of which
this prospectus forms a part, without obtaining the prior written approval of
the representative except for an aggregate of 200,000 held by non-executive
officers to be given to non-executive officers designated by the Company. The
representative may consent to an early release from the lock-up periods if, in
its opinion, the market for the common stock would not be adversely impacted by
sales and in cases of a financial emergency of an officer, director or other
stockholder. We are unaware of any officer, director or current shareholder who
intends to ask for consent to dispose of any of our equity securities during the
lock-up period. In connection with this offering, we are issuing to the
underwriters warrants to acquire our common stock, exercisable at no less than
120% of the initial public offering price of our shares in this offering,
exercisable commencing on year from the effective date of the registration
statement of which this prospectus forms a part and expiring five years from the
effective date of this registration statement. The representative of the
underwriters has agreed that they will not transfer the warrants or underlying
common stock except to officers, partners or members of the representative of
the underwriters.
Electronic
Delivery
A
prospectus in electronic format may be made available on the websites maintained
by one or more of the underwriters. The representative may agree to allocate a
number of shares to underwriters for sale to their online brokerage account
holders. The representative will allocate shares to underwriters that may make
Internet distributions on the same basis as other allocations. In addition,
shares may be sold by the underwriters to securities dealers who resell shares
to online brokerage account holders.
Other
Terms
In
connection with this offering, the underwriters or certain of the securities
dealers may distribute prospectuses electronically. No forms of prospectus other
than printed prospectuses and electronically distributed prospectuses that are
printable in Adobe PDF format will be used in connection with this
offering.
Stabilization
Until the
distribution of the shares of common stock offered by this prospectus is
completed, rules of the SEC may limit the ability of the underwriters to bid for
and to purchase our securities. As an exception to these rules, the underwriters
may engage in transactions effected in accordance with Regulation M under the
Securities Exchange Act of 1934 that are intended to stabilize, maintain or
otherwise affect the price of our common stock. The underwriters may engage in
over-allotment sales, syndicate covering transactions, stabilizing transactions
and penalty bids in accordance with Regulation M.
·
|
Stabilizing
transactions permit bids or purchases for the purpose of pegging, fixing
or maintaining the price of the common stock, so long as stabilizing bids
do not exceed a specified maximum.
|
·
|
Over-allotment
involves sales by the underwriters of shares in excess of the number of
shares the underwriters are obligated to purchase, which creates a short
position. The short position may be either a covered short position or a
naked short position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number of shares
that they may purchase in the over-allotment option. In a naked short
position, the number of shares involved is greater than the number of
shares in the over-allotment option. The underwriters may close out any
covered short position by either exercising their over-allotment option or
purchasing shares in the open
market.
|
·
|
Covering
transactions involve the purchase of securities in the open market after
the distribution has been completed in order to cover short positions. In
determining the source of securities to close out the short position, the
underwriters will consider, among other things, the price of securities
available for purchase in the open market as compared to the price at
which they may purchase securities through the over-allotment option. If
the underwriters sell more shares of common stock than could be covered by
the over-allotment option, creating a naked short position, the position
can only be closed out by buying securities in the open market. A naked
short position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of the
securities in the open market after pricing that could adversely affect
investors who purchase in this
offering.
|
56
·
|
Penalty
bids permit the underwriters to reclaim a selling concession from a
selected dealer when the shares of common stock originally sold by the
selected dealer are purchased in a stabilizing or syndicate covering
transaction.
|
These
stabilizing transactions, covering transactions and penalty bids may have the
effect of raising or maintaining the market price of our common stock or
preventing or retarding a decline in the market price of our common stock. As a
result, the price of our common stock may be higher than the price that might
otherwise exist in the open market.
Neither
we nor the underwriters make any representation or prediction as to the effect
that the transactions described above may have on the prices of our securities.
These transactions may occur on the NASDAQ Capital Market or on any other
trading market. If any of these transactions are commenced, they may be
discontinued without notice at any time.
Indemnification
The
underwriting agreement provides for indemnification between us and the
underwriters against specified liabilities, including liabilities under the
Securities Act, and for contribution by us and the underwriters to payments that
may be required to be made with respect to those liabilities. We have been
advised that, in the opinion of the SEC, indemnification for liabilities under
the Securities Act is against public policy as expressed in the Securities Act,
and is therefore, unenforceable.
DESCRIPTION
OF SECURITIES
The
Company is authorized by its Certificate of Incorporation to issue an aggregate
of 50,000,000 shares of capital stock, of which 40,000,000 are shares of common
stock, par value $.001 per share (the "Common Stock") and 10,000,000 are shares
of preferred stock, par value $.001 per share (the “Preferred Stock”). As of
February 2, 2010 , 2,735,516 shares of Common Stock
were issued and 2,310,516 were outstanding and no shares of Preferred Stock were
issued and outstanding.
Common
Stock
All
outstanding shares of Common Stock are of the same class and have equal rights
and attributes. The holders of our Common Stock are entitled to one vote
per share on all matters submitted to a vote of our stockholders. All
stockholders are entitled to share equally in dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available. In the event of liquidation, the holders of our Common Stock are
entitled to share ratably in all assets remaining after payment of all
liabilities.
Preferred
Stock
Our
certificate of incorporation permits our Board of Directors to fix the rights,
preferences and privileges of, and issue up to 10,000,000 shares of, preferred
stock with voting, conversion, dividend and other rights and preferences that
could adversely affect the voting power or other rights of our shareholders. The
issuance of preferred stock or rights to purchase preferred stock could have the
effect of delaying or preventing a change in control of our company. In
addition, the possible issuance of additional preferred stock could discourage a
proxy contest, make the acquisition of a substantial block of our common stock
more difficult or limit the price that investors might be willing to pay for
shares of our common stock. The Board of Directors of Midas Medici
has adopted a resolution that it will not offer preferred stock to its promoters
except on the same terms as it is offered to all other existing or new
shareholders or the issuance of such shares of preferred stock to its
promoters is approved by a majority of Midas Medici’s independent directors (who
do not have an interest in the transaction and have access to independent legal
counsel at Midas Medici’s expense).
The
description of certain matters relating to our securities is a summary
and is qualified in its entirety by the provisions of our Certificate of
Incorporation and By-Laws, copies of which have been filed as exhibits
to our Form 10-SB filed with the Commission on May 2, 2007.
57
LEGAL
MATTERS
The
validity of the shares sold by us under this prospectus will be passed upon for
us by Sichenzia Ross Friedman Ference LLP in New York, New York. Hodgson Russ
LLP in New York, New York has acted as counsel for the
underwriters.
EXPERTS
The
financial statements of Midas
Medici Group Holdings, Inc. and Subsidiaries, formerly
Utilipoint International, Inc. and subsidiary, as of and for the
years ended December 31, 2008 and 2007 included in this prospectus have been
audited by REDW LLC, independent registered public accounting firm to the
extent and for the periods set forth in their report appearing elsewhere herein
and are included in reliance upon such report given upon the authority of that
firm as experts in auditing and accounting.
CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNTANT
On July
16, 2009, our Board of Directors dismissed RBSM LLP (“RBSM”) as our independent
registered public accounting firm.
During
the fiscal years ended December 31, 2008 and December 31,
2007, RBSM’s reports on the Company's financial statements did not
contain an adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles except, RBSM’s
audit reports for the year ended December 31, 2008 and December 31, 2007 stated
that several factors raised substantial doubt about the Company’s ability to
continue as a going concern and that the financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
During
the fiscal years ended December 31, 2008 and December 31, 2007 and the
subsequent interim period through July 16, 2009, (i) there were no disagreements
between the Company and RBSM on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to the satisfaction of RBSM would have caused RBSM to make
reference to the matter in its reports on the Company's financial statements;
and (ii) there were no reportable events as the term described in
Item 304(a)(1)(iv) of Regulation S-K.
On July
16, 2009, the Company engaged J.H. Cohn LLP (“JH Cohn”) as its independent
registered public accounting firm for the Company’s fiscal year ended December
31, 2009. The change in the Company’s independent registered public accounting
firm was approved by the Company’s Board of Directors on July 16,
2009.
During
the year ended December 31, 2008 and any subsequent period through July 16,
2009, the Company did not consult with JH Cohn regarding either (i) the
application of accounting principles to a specific completed or contemplated
transaction, or the type of audit opinion that might be rendered on the
Company’s financial statements or (ii) any matter that was either the subject of
a disagreement or event identified in response to (a)(1)(iv) of Item 304 of
Regulation S-K.
DISCLOSURE
OF COMMISSION POSITION OF
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Section
145 (“Section 145”) of the Delaware General Corporation Law, as amended (the
“DGCL”), permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a present or former director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith.
Our
Certificate of Incorporation, as amended, provides that no current or former
director of ours shall be personally liable to the us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the DGCL as the same exists or may hereafter be amended.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(Securities Act) may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
58
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to informational filing requirements of the U.S. Securities Exchange Act
of 1934, as amended, and its rules and regulations. This means that we will file
reports and other information with the U.S. Securities and Exchange Commission.
You can inspect and copy this information at the Public Reference Facility
maintained by the SEC at 100 F. Street, N.E., Room 1580,
Washington, D.C. 20549. You can receive additional information about the
operation of the SEC's Public Reference Facilities by calling the SEC at
1-800-SEC-0330. The SEC maintains a Web site that will contain the reports and
other information that we file electronically with the Commission and the
address of that website is http://www.sec.gov.
Statements contained in this prospectus as to the intent of any contract or
other document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of the particular contract or other document filed
as an exhibit to this registration statement, each statement being qualified in
all respects by this reference.
This
prospectus is part of a registration statement we filed with the SEC. You should
rely only on the information or representations provided in this prospectus. We
have not authorized anyone to provide you with any information other than that
provided in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
59
Index
to Financial Statements
Page
|
||||
Midas
Medici Group Holdings, Inc. and Subsidiaries (Formerly
Utilipoint International, Inc. and Subsidiaries)
|
||||
Condensed Consolidated
Balance Sheets as of September 30, 2009 (Unaudited) and December 31,
2008
|
F-2
|
|||
Condensed Consolidated
Statements of Operations and Comprehensive Loss (Unaudited)
for
the nine months ended September 30, 2009 and 2008
|
F-3
|
|||
Condensed Consolidated
Statements of Stockholders’ Deficit (Unaudited) for the three and
nine months ended September 30, 2009
|
F-4
|
|||
Condensed Consolidated
Statements of Cash Flows (Unaudited) for the nine months ended September
30, 2009 and 2008
|
F-5
|
|||
Notes
to Unaudited Condensed Consolidated Financial
Statements
|
F-6-F-15
|
|||
Report
of Independent Registered Public Accounting Firm
|
F-16
|
|||
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
F-17
|
|||
Consolidated
Statements of Operations for the years ended December 31, 2008 and
2007
|
F-18
|
|||
Consolidated
Statements of Stockholders’ Deficit and Comprehensive Income (Loss) for
the years ended December 31, 2008 and 2007
|
F-19
|
|||
Consolidated
Statements of Cash Flows for the years ended December 31, 2008 and
2007
|
F-20
|
|||
Notes
to Consolidated Financial Statements December 31, 2008 and
2007
|
F-21-F-35
|
F-1
Midas
Medici Group Holdings, Inc. and Subsidiaries
(Formerly
Utilipoint International, Inc. and Subsidiaries)
Condensed
Consolidated Balance Sheets
As of September 30, 2009 and December 31, 2008
September
30, 2009
(Unaudited)
|
December
31, 2008
(Note 2)
|
|||||||
Restated
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 112,335 | $ | 144,546 | ||||
Accounts
receivable, net
|
408,605 | 552,517 | ||||||
Prepaid
expenses and other current assets
|
23,083 | 42,593 | ||||||
Total
current assets
|
544,023 | 739,656 | ||||||
Property
and equipment, net
|
23,603 | 34,266 | ||||||
Other
assets
|
2,952 | 2,953 | ||||||
Total
assets
|
$ | 570,578 | $ | 776,875 | ||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 578,803 | $ | 336,906 | ||||
Accrued
expenses
|
464,591 | 188,555 | ||||||
Revolving
credit facility
|
53,764 | 216,590 | ||||||
Deferred
revenue
|
180,455 | 154,011 | ||||||
Current
portion of long-term debt
|
493,138 | 60,792 | ||||||
Current
portion of capital lease obligations
|
13,493 | 16,242 | ||||||
Preferred
stock dividends payable - stated
|
178,208 | 68,250 | ||||||
Preferred
stock dividends payable - accreted
|
- | 395,585 | ||||||
Common
stock put options
|
- | 269,000 | ||||||
Management
fee payable
|
113,978 | 50,000 | ||||||
Other
current liabilities
|
20,566 | 5,299 | ||||||
Total
current liabilities
|
2,096,996 | 1,761,230 | ||||||
Long-term
debt, less current portion
|
196,469 | 514,606 | ||||||
Capital
lease obligations, less current portion
|
8,402 | 16,409 | ||||||
Total
liabilities
|
2,301,867 | 2,292,245 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
deficit:
|
||||||||
Preferred
stock, par value $0.001; 10,000,000 shares
authorized;
no shares issued as of September 30, 2009 and December 31, 2008,
respectively
|
- | - | ||||||
Common
stock, $0.001 par value; 40,000,000 authorized; issued 2,735,516 and
outstanding 2,310,516 shares at
September
30, 2009; issued 2,192,094 and outstanding 1,383,483 shares at December
31, 2008
|
2,736 | 2,192 | ||||||
Treasury
stock, at cost; 425,000 and 808,611 shares at September 30, 2009 and
December 31, 2008, respectively
|
(40 | ) | (974,015 | ) | ||||
Additional
paid-in capital
|
(187,719 | ) | 540,997 | |||||
Common
stock put options
|
- | (269,000 | ) | |||||
Accumulated
deficit
|
(1,483,705 | ) | (812,782 | ) | ||||
Accumulated
other comprehensive income (loss)
|
8,480 | (2,762 | ) | |||||
Total
stockholders' deficit of Midas Medici Group Holdings, Inc.
|
(1,660,248 | ) | (1,515,370 | ) | ||||
Non-controlling
interest
|
(71,041 | ) | - | |||||
Total
stockholders' deficit
|
(1,731,289 | ) | (1,515,370 | ) | ||||
Total
liabilities and stockholders' deficit
|
$ | 570,578 | $ | 776,875 | ||||
See the
accompanying footnotes to unaudited condensed consolidated financial
statements
F-2
Midas
Medici Group Holdings, Inc. and Subsidiaries
(Formerly
Utilipoint International, Inc. and Subsidiaries)
Condensed
Consolidated Statements of Operations and Comprehensive Loss
Three and Nine Months Ended September 30, 2009 and 2008
(Unaudited)
|
||||||||||||||||
Three
Months Ended September 30, 2009
|
Three
Months Ended September 30, 2008
|
Nine
Months Ended September 30, 2009
|
Nine
Months Ended September 30, 2008
|
|||||||||||||
Restated
|
Restated
|
|||||||||||||||
Net
revenues
|
$ | 837,404 | $ | 1,055,595 | $ | 2,566,962 | $ | 2,826,650 | ||||||||
Cost
of services
|
506,153 | 599,581 | 1,445,193 | 1,485,006 | ||||||||||||
Gross
margin
|
331,251 | 456,014 | 1,121,769 | 1,341,644 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
820,474 | 493,683 | 1,784,968 | 1,338,676 | ||||||||||||
Depreciation
and amortization
|
4,421 | 4,464 | 13,835 | 12,207 | ||||||||||||
Total
operating expenses
|
824,895 | 498,147 | 1,798,803 | 1,350,883 | ||||||||||||
Operating
loss
|
(493,644 | ) | (42,133 | ) | (677,034 | ) | (9,239 | ) | ||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
1 | - | 2 | - | ||||||||||||
Interest
expense
|
(19,791 | ) | (19,888 | ) | (62,855 | ) | (49,332 | ) | ||||||||
Total
other income (expense)
|
(19,790 | ) | (19,888 | ) | (62,853 | ) | (49,332 | ) | ||||||||
Loss
before income taxes
|
(513,434 | ) | (62,021 | ) | (739,887 | ) | (58,571 | ) | ||||||||
Provision
(benefit) for income taxes
|
- | (13,879 | ) | 2,077 | (1,362 | ) | ||||||||||
Net
loss
|
(513,434 | ) | (48,142 | ) | (741,964 | ) | (57,209 | ) | ||||||||
Less:
Net loss attributable to the non-controlling interest
|
69,634 | - | 71,041 | - | ||||||||||||
Net
loss attributable to Midas Medici Group Holdings, Inc.
|
(443,800 | ) | (48,142 | ) | (670,923 | ) | (57,209 | ) | ||||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||||||
Preferred
stock stated dividends
|
(41,708 | ) | (34,125 | ) | (109,958 | ) | (102,375 | ) | ||||||||
Preferred
stock dividend accretion
|
(30,377 | ) | (72,285 | ) | (203,109 | ) | (201,659 | ) | ||||||||
Net
loss applicable to common stockholders
|
$ | (515,885 | ) | $ | (154,552 | ) | $ | (983,990 | ) | $ | (361,243 | ) | ||||
Net
loss per common share (basic and diluted)
|
$ | (0.32 | ) | $ | (0.11 | ) | $ | (0.64 | ) | $ | (0.26 | ) | ||||
Weighted
average common shares outstanding (basic and diluted)
|
1,600,037 | 1,355,631 | 1,531,736 | 1,372,730 | ||||||||||||
Comprehensive
loss:
|
||||||||||||||||
Net
loss
|
$ | (513,434 | ) | $ | (48,142 | ) | $ | (741,964 | ) | $ | (57,209 | ) | ||||
Foreign
currency translation
|
(4,882 | ) | - | 11,242 | - | |||||||||||
Total
comprehensive loss
|
(518,316 | ) | (48,142 | ) | (730,722 | ) | (57,209 | ) | ||||||||
Comprehensive
loss attributable to the non-controlling interest
|
69,634 | - | 71,041 | - | ||||||||||||
Comprehensive
loss attributable to Midas Medici Group Holdings, Inc.
|
$ | (448,682 | ) | $ | (48,142 | ) | $ | (659,681 | ) | $ | (57,209 | ) | ||||
See the
accompanying footnotes to unaudited condensed consolidated financial
statements
F-3
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
|||||||||||
(Formerly
Utilipoint International, Inc. and Subsidiaries)
|
|||||||||||
Condensed
Consolidated Statements of Stockholders' Deficit
Nine Months Ended September 30, 2009
(Unaudited)
|
|||||||||||
Restated
|
|||||||||||
|
Common
Stock
|
Additional
Paid-in Capital
|
Treasury Stock
|
Common
Stock Put Options
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
Stockholders' Deficit
|
Non-Controlling
Interest
|
Total
Deficit
|
||||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||||||||||||||
Balance
- December 31, 2008
|
2,192,094 | $ | 2,192 | $ | 540,997 | 808,611 | $ | (974,015 | ) | $ | (269,000 | ) | $ | (812,782 | ) | $ | (2,762 | ) | $ | (1,515,370 | ) | $ | (1,515,370 | ) | ||||||||||||||||||||
Sales
of common stock
|
15,981 | 16 | 24,984 | 25,000 | 25,000 | |||||||||||||||||||||||||||||||||||||||
Treasury
stock received at $0.00 cost
|
50,948 | - | - | |||||||||||||||||||||||||||||||||||||||||
Effect
of reverse merger adjustments
|
1,387,000 | 1,387 | (262,546 | ) | 425,000 | (40 | ) | (261,199 | ) | (261,199 | ) | |||||||||||||||||||||||||||||||||
Accretion
of accelerated and balloon dividends on preferred stock
|
(203,109 | ) | (203,109 | ) | (203,109 | ) | ||||||||||||||||||||||||||||||||||||||
Elimination
of treasury stock upon reverse merger
|
(859,559 | ) | (859 | ) | (973,156 | ) | (859,559 | ) | 974,015 | - | - | |||||||||||||||||||||||||||||||||
Elimination
of
accrued
common
stock
put
options
upon
reverse
merger
|
269,000 | 269,000 | 269,000 | |||||||||||||||||||||||||||||||||||||||||
Elimination
of
accumulated
accretion
of
accelerated
and
balloon
dividends
on
preferred stock
upon
reverse
merger
|
598,694 | 598,694 | 598,694 | |||||||||||||||||||||||||||||||||||||||||
Preferred
dividends
|
(109,958 | ) | (109,958 | ) | (109,958 | ) | ||||||||||||||||||||||||||||||||||||||
Stock-based
compensation
|
196,375 | 196,375 | 196,375 | |||||||||||||||||||||||||||||||||||||||||
Foreign
currency
translation |
11,242 | 11,242 | 11,242 | |||||||||||||||||||||||||||||||||||||||||
Loss
attributed
to
Non-
Controlling
Interest
|
- | (71,041 | ) | (71,041 | ) | |||||||||||||||||||||||||||||||||||||||
Net
loss
attributable
to
Midas
Medici
Group
Holdings,
Inc.
|
(670,923 | ) | (670,923 | ) | (670,923 | ) | ||||||||||||||||||||||||||||||||||||||
Balance
- September 30, 2009
|
2,735,516 | $ | 2,736 | $ | (187,719 | ) | 425,000 | $ | (40 | ) | $ | - | $ | (1,483,705 | ) | $ | 8,480 | $ | (1,660,248 | ) | $ | (71,041 | ) | $ | (1,731,289 | ) | ||||||||||||||||||
See the
accompanying footnotes to unaudited condensed consolidated financial
statements
F-4
Midas
Medici Group Holdings, Inc. and Subsidiaries
(Formerly
Utilipoint International, Inc. and Subsidiaries)
Condensed
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2009 and 2008
(Unaudited)
Nine
Months
Ended
September
30,
2009
|
Nine
Months
Ended
September
30,
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (741,964 | ) | $ | (57,209 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
13,835 | 12,207 | ||||||
Provision
for uncollectible accounts
|
- | 3,425 | ||||||
Stock-based
compensation
|
196,375 | - | ||||||
Deferred
taxes
|
- | (4,302 | ) | |||||
Changes
in operating assets and liabilities net of effects of consolidation of
Utilipoint International, Inc:
|
||||||||
Accounts
receivable
|
150,795 | (81,482 | ) | |||||
Prepaid
expenses and other current assets
|
20,074 | 86,205 | ||||||
Accounts
payable
|
159,794 | 2,219 | ||||||
Accrued
expenses and other current liabilities
|
91,623 | 54,577 | ||||||
Deferred
revenue
|
25,813 | (50,599 | ) | |||||
Management
fees payable
|
63,978 | 25,000 | ||||||
Other
|
4,310 | (11,602 | ) | |||||
Net
cash used in operating activities
|
(15,367 | ) | (21,561 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Additions
to property and equipment
|
(1,081 | ) | (2,411 | ) | ||||
Net
cash acquired from acquisition
|
16,482 | - | ||||||
Net
cash provided by (used in) investing activities
|
15,401 | (2,411 | ) | |||||
Cash
flows from financing activities:
|
||||||||
Net
borrowings (payments) on revolving credit facility
|
(163,062 | ) | 164,894 | |||||
Change
in bank overdrafts
|
- | (113,937 | ) | |||||
Principal
payments on capital lease obligations
|
(12,639 | ) | (10,362 | ) | ||||
Principal
payments on notes payable
|
(97,260 | ) | (78,233 | ) | ||||
Proceeds
from notes payable
|
212,046 | 150,000 | ||||||
Proceeds
from issuance of common stock
|
25,000 | - | ||||||
Distribution/dividend
to preferred stockholders
|
- | (68,250 | ) | |||||
Net
cash provided by (used in) financing activities
|
(35,915 | ) | 44,112 | |||||
Net
increase (decrease) in cash and cash equivalents
|
(35,881 | ) | 20,140 | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
3,670 | - | ||||||
Cash
and cash equivalents at beginning of period
|
144,546 | - | ||||||
Cash
and cash equivalents at end of period
|
$ | 112,335 | $ | 20,140 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 55,350 | $ | 42,480 | ||||
Taxes
|
$ | 2,077 | $ | 2,940 | ||||
Supplemental
disclosure of non-cash financing and investing activities:
|
||||||||
Property
and equipment acquired under capital leases
|
$ | 1,884 | $ | 13,054 | ||||
See the
accompanying footnotes to unaudited condensed consolidated financial
statements
F-5
MIDAS
MEDICI GROUP HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY UTILIPOINT INTERNATIONAL,
INC. AND SUBSIDIARIES)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE
1 - DESCRIPTION OF BUSINESS
Midas
Medici Group Holdings, Inc, formerly Mondo Acquisition I, Inc. (“Midas Medici”,
or the “Company”), was incorporated in the State of Delaware on October 30, 2006
for the purpose of raising capital that is intended to be used in connection
with its business plans which may include a possible merger, acquisition or
other business combination with an operating business. On May 15, 2009, Mondo
Management Corp., the then sole shareholder, and Midas Medici Group, Inc.
entered into a Purchase Agreement. Pursuant to the Purchase
Agreement, Mondo Management Corp. sold to Midas Medici Group
1,000,000 previously issued and
outstanding shares of Mondo Management Corp.'s
restricted common stock, comprising 100%
of the issued and
outstanding capital stock of Mondo Management
Corp. The execution of the Purchase Agreement resulted in a change in control of
the Company, both in its shareholding and management. Effective May 22, 2009,
the Company changed its name to Midas Medici Group Holdings, Inc.
Utilipoint
International, Inc. (“Utilipoint”), together with its subsidiaries, is a utility
and energy consulting, and issues analysis firm. Utilipoint offers public issues
and regulatory management, advanced metering infrastructure and meter data
management, rates and demand response, utility energy and technology, trading
and risk management, and energy investment services. Utilipoint provides its
services to energy companies, utilities, investors, regulators, and industry
service providers primarily in North America and Europe. Utilipoint also serves
select clients in Asia, South America, Africa and the Middle East. Utilipoint is
headquartered in Albuquerque, New Mexico, with two domestic regional offices in
Tulsa, Oklahoma and Sugar Land, Texas, and is incorporated under the laws of the
State of New Mexico. Utilipoint also has a wholly owned subsidiary, Utilipoint,
s.r.o., in the Czech Republic and maintains its international operations through
its office in Brno, Czech Republic.
In July
2009, Utilipoint acquired a controlling interest in The Intelligent Project, LLC
(“IP”). IP is a research and advisory services firm addressing the challenges
that utilities face in advancing and solving electricity consumers’ needs
related to the Smart Grid. IP is headquartered in West Lafayette, Indiana. The
acquisition was accounted for as a combination of entities under common
control. As such, expenditures amounting to $177,603 for the period
from January 1, 2009 through the date of acquisition have been included in the
condensed consolidated statement of operations and comprehensive loss as if the
acquisition had occurred on January 1, 2009.
IP was
founded on March 10, 2009, by KLI IP Holding, Inc. and David Steele, the current
president of Utilipoint and former President of a predecessor Knox Lawrence
International, LLC (“KLI”) portfolio company. Nana Baffour, our
CEO, was the managing member of IP prior to the
acquisition. IP’s management committee consisted of Nana Baffour,
Johnson Kachidza, David Steele and Ken Globerman, a KLI employee. Prior to the
acquisition, David Steele, a managing director of IP was also a senior managing
director of Utilipoint. From inception to when IP was acquired, its
operations were funded through loans provided by KLI. Prior to its acquisition,
IP was controlled by KLI IP Holding Inc., which held a 75% interest in
IP. KLI IP Holding, Inc. is controlled by Nana Baffour and Johnson
Kachidza, who held a 60% interest.
In
connection with the acquisition of IP:
1)
|
The
Company entered into a capital commitment agreement with IP for an amount
of up to $200,000. IP will be able to make capital requests on
the capital commitment agreement for initial financing. The
Company received a 60% interest in IP as a result of
signing the capital contribution agreement. As of September 30,
2009, the Company has provided no capital under the capital
commitment agreement.
|
2)
|
The
existing members of IP will provide services to the Company in exchange
for options to purchase an aggregate of 44,747 shares of the common stock
of the Company that are fully-vested on the date of grant and that have a
strike price equal to the fair market value of the Company’s common stock
on the date of grant. The stock options for the individuals
will be granted pursuant to the equity compensation plan that was adopted
by the Company effective as of May 1, 2009. All of the stock
options will have a term of five years and a cashless exercise
option.
|
3)
|
The
Company will provide certain management services to IP in exchange for
reasonable compensation.
|
4)
|
KLI
will agree to purchase up to $100,000 of the common stock of the Company
at a per share purchase price of $50.00 per share and will agree to lend
up to $100,000 pursuant to a Revolving Senior Subordinated
Debenture.
|
On August
21, 2009, Midas Medici and Utilipoint entered into a reverse merger transaction
(discussed further in Note 4), which results in Midas Medici being the “legal
acquirer” and Utilipoint the “accounting acquirer”. The prospective filings with
the Securities and Exchange Commission (the “SEC”) included the historical
financial results of Utilipoint as of and for the periods ended September 30,
2009 and 2008 and Midas Medici, and its subsidiaries only as of and for the
period commencing August 21, 2009, the date of the reverse merger.
At the
closing of the Merger Agreement on August 21, 2009, Midas Medici ceased to
be a shell company. Any reference to “Company”, “Midas Medici”, “we” or “our”
after August 21, 2009, refers to Midas Medici Group Holdings, Inc. together with
our wholly-owned subsidiary Utilipoint and its subsidiaries.
References
herein to Utilipoint common shares has been retrospectively adjusted
to reflect the exchange ratio 31.96217203 Midas Medici common shares for each
share of Utilipoint common stock established in the Merger
Agreement.
F-6
NOTE
2 – LIQUIDITY AND BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the condensed consolidated financial position of Midas Medici and its
subsidiaries as of September 30, 2009, their results of operations for the three
and nine months ended September 30, 2009, and 2008, changes in stockholders’
deficit for the nine months ended September 30, 2009 and cash flows for the nine
months ended September 30, 2009 and 2008. The December 31, 2008 consolidated
balance sheet has been derived from the audited consolidated financial
statements.
Our
condensed consolidated financials statements have been prepared assuming that we
will continue as a going concern, which contemplates the realization of assets
and the settlement of liabilities in the normal course of business and,
accordingly, no adjustments have been made to recorded amounts to reflect the
outcome of this uncertainty. The Company’s accumulated deficit at September 30,
2009 was $1,483,705 and the Company incurred a net loss of $741,964 for the nine
months ended September 30, 2009.
Certain amounts in the 2008 condensed consolidated financial
statements and notes thereto have been reclassified to conform to the 2009
financial statements presentation.
At
September 30, 2009, the Company had working capital deficiency of $1,552,973.
Historically, Utilipoint has funded its operations with cash obtained mainly
from stockholders and third party financings. As a wholly-owned subsidiary of
Midas Medici, Utilipoint anticipates receiving external financing (upon
completion of Midas Medici’s initial public offering) to fund its
working capital needs which will allow it to solve its
liquidity issues. Utilipoint is currently taking steps to improve its
operational results and liquidity including the following:
Increased
Staff Utilization – The Company has begun implementing definitive plans
to increase staff utilization which management believes will improve
margins.
Increased
Business Development and Executive Leadership Resources – In July 2009,
with the combination of IP, two veteran executives joined Utilipoint. IP is
a research and advisory services firm focused on assisting utilities with the
challenge of advancing and solving customer dimension complexities of the Smart
Grid. The addition of these individuals significantly increased
Utilipoint’s resources in business development and executive leadership.
Management believes this addition of executive talent will significantly
increase its revenues and profits while optimizing how it manages its
operations.
Deferring
of Insider Obligations – The Company has on its books, as of
September 30, 2009, debts and obligations due to insiders of
approximately $500,000. These debts and obligations, some of which were due on
August 20, 2009 in the amount of $21,309 have been deferred by those insiders
and will be paid out of the proceeds of this offering.
Management
believes it will be successful in completing the foregoing actions which will
enable the Company to operate its business in a sustainable manner through
December 31, 2010.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Significant estimates include: allowances for doubtful
accounts, certain revenue recognition methodologies related to contract
deliverables, valuation allowances for deferred tax assets, rates at which
deferred tax assets and liabilities are expected to be recorded or settled,
accruals for paid time off and the estimated labor utilization rate used to
determine cost of services for the Company’s foreign
subsidiary.
(b)
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers highly liquid
financial instruments purchased with original maturities of three months or less
to be cash equivalents.
(c)
Allowance
for Doubtful Accounts
Allowance
for doubtful accounts are based on evaluation of customers’ ability to meet
their financial obligations to the Company. When evaluation indicates that
the ability to pay is impaired, a specific allowance against amounts due is
recorded thereby reducing the net recognized receivable to the amount the
Company reasonably believes will be collected. When management determines that
receivables are not collectible, the gross receivable is written off against the
allowance for doubtful accounts.
F-7
(d)
Income
Taxes
The
current or deferred tax consequences of all events that have been recognized in
the financial statements are measured based on provisions of enacted tax law to
determine the amount of taxes payable or refundable in future periods. Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities, and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates for the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred tax
assets and liabilities is recognized into income during the period that includes
the enactment date. A valuation allowance is established to reduce
deferred tax assets if it is more likely than not that all, or some portion of,
such deferred tax assets will not be realized. The Company accounts for
uncertain tax positions in accordance with provision FASB ASC 740, Subtopic FASB
ASC 740, Subtopic 10 which prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The Company does not believe it
has any material unrecognized income tax positions. As of September 30, 2009,
deferred tax assets have been fully offset by a valuation allowance and
therefore no tax benefit has been recognized on the loss through September 30,
2009.
(e)
Fair
Value of Financial Instruments
The
carrying amounts of financial instruments, which include cash and cash
equivalents, accounts receivable, prepaid expenses and other current assets,
accounts payable, accrued expenses, other current liabilities, revolving credit
facility and debt approximate their fair values due to their short maturities
and variable interest rate on the revolving credit facility and fixed rates
which approximate market rates on significant notes payable. Based on borrowing
rates currently available to the Company for loans with similar terms, the
carrying value of capital lease obligations approximates fair
value.
(f)
Revenue
Recognition
The Company's primary revenue streams and the basis on which
revenue is recognized for each are as follows:
Fixed-Price Contracts
Fixed price contracts are projects where services are provided at an
agreed upon price for defined deliverables. On occasion, clients with fixed
price contracts will require an accounting of all hours worked on a project at
an agreed upon hourly rate to accompany an invoice.
The Company recognizes revenue when a deliverable is provided
except in the case where the client requires that time reporting accompany an
invoice. In that case, Utilipoint recognizes revenue up to the amount the time
records support, in that clients requiring time reporting with hourly rates on
fixed price contracts typically can only ask for refunds on fixed price projects
up to the amount as if the contract had been time and materials. With acceptance
of the final deliverable, all revenue is recognized.
Bundled Service Agreements (“BSAs”)
BSAs are packages of services that clients subscribe to, typically on
an annual contract basis. The services typically include a combination of the
following:
• Access
to subject matter experts as needed, by telephone
• Discounted
fees for Utilipoint events
• Advertising
space on the IssueAlert® e-publication
• One
to three reports and/or whitepapers on industry topics
• Briefings
on industry trends and research findings
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, independent system operators and consumer advocacy groups to
come together and discuss meter data management successes, problems, issues,
interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to the
Company's directory and InfoGrid products. The primary service is the block
of hours purchased.
F-8
The
Company believes that the substance of BSAs, as pointed out in a recent
survey of its clients, indicates that the purchaser pays for a service that is
delivered over time. As a result, revenue recognition occurs over the
subscription period, or in the case of corporate contracts as the hours are
utilized, reflecting the pattern of provision of service.
Time
and Materials Contracts (“T&M”)
T&M
are services billed at a set hourly rate. Project related expenses
are passed through at cost to clients. Normally invoices occur on
monthly basis. The Company recognizes revenue as billed unless the project has a
major deliverable(s) associated with it, in which case the revenue is deferred
until the major deliverable(s) is provided.
Events
and Sponsorships
The
Company hosts events such as conferences. These events include
revenues from sponsorships and registration fees which are recognized in the
month of the event. Revenues from sponsors of the AMI MDM forum are
recognized over the annual subscription period, reflecting the pattern of
provision of service.
The
Company's deferred revenue consists primarily of amounts received from or
billed to clients in conjunction with BSAs, T&M and fixed price contracts
for which revenue is recognized over time or upon completion of contract
deliverables.
(g)
Property and Equipment
Property
and equipment is carried at cost, less accumulated depreciation and
amortization. Depreciation and amortization is calculated using the
straight-line method over the useful lives that typically range from three to
ten years. Equipment under capital leases is amortized over the
lesser of the lease term which is typically three years and is removed from the
Company’s accounting records upon lease termination.
(h)
Foreign Currency Translation and Transactions
The U.S.
dollar is the reporting currency for all periods presented. The financial
information for the Company outside the United States is measured using the
local currency as the functional currency. Assets and liabilities for the
Company’s foreign subsidiary are translated into U.S. dollars at the exchange
rate in effect on the respective balance sheet dates, and revenues and expenses
are translated into U.S. dollars based on the average rate of exchange for the
corresponding period. Exchange rate differences resulting from translation
adjustments are accounted for as a component of accumulated other comprehensive
income (loss). Gains and (losses) from foreign currency transactions are
reflected in the consolidated statements of operations under the line item
selling, general and administrative expense. The foreign exchange gain (loss)
was $(841) and $(8,194) for the three and nine months ended September 30, 2009,
respectively, and $166 and $(4,947) for the three and nine months ended
September 30, 2008. Such foreign currency transactions include primarily
billings denominated in foreign currencies by the Company’s U.S. subsidiary,
which are reported based on the applicable exchange rate in effect on the
balance sheet date. The related deferred revenue from such billings is reported
in U.S. dollars at the exchange rate in effect at the billing dates when the
revenue was deferred.
(i)
Comprehensive Income (Loss)
Comprehensive
income (loss) consists of net loss or gains on foreign currency translations and
net income or loss from operations and is presented in the consolidated
statements of stockholders’ equity. This includes charges and credits to equity
that are not the result of transactions with stockholders. Included in other
comprehensive income (loss) are the cumulative translation adjustments related
to the net assets of the operations of the Company’s foreign subsidiary. These
adjustments are accumulated within the consolidated statements of stockholders’
equity under the caption “Accumulated Other Comprehensive Income (Loss)”. Other
comprehensive income (loss) was ($4,882) and $11,242 for the three
and nine months ended September 30, 2009, respectively, and $0 for the
three and nine months ended September 30, 2008.
(j)
Stock-Based Compensation
The
Company accounts for stock-based compensation arrangements in accordance with
the provision of FASB ASC 178, Share Based Payment. Compensation expense
that the Company recognizes includes expense associated with the fair value of
share-based awards granted.
NOTE
4 – REVERSE MERGER
On August
21, 2009, Midas Medici completed a reverse merger with privately held
Utilipoint, a New Mexico corporation which results in Midas Medici being the
“legal acquirer” and Utilipoint the “accounting acquirer”. The acquisition was
effected pursuant to a Merger Agreement dated August 10, 2009 by and among the
Company, Utilipoint and Utilipoint Acquisition Company. Pursuant to the Merger
Agreement, an aggregate of 1,348,516 shares of Midas Medici were issued to
Utilipoint shareholders in exchange for 42,191 Utilipoint shares (which
represents 100% of the then outstanding shares). This includes 21,523 Utilipoint
Series A Preferred Stock that were converted to 687,922 Midas Medici common
shares. Further, all outstanding Utilipoint options were exchanged for 172,597
Midas Medici options in accordance with the Midas Medici stock option program,
adopted on July 27, 2009. Immediately after the closing of the acquisition and
as of September 30, 2009, an aggregate of 2,310,516 shares of common stock were
outstanding. Hence, the 1,348,516 shares represented approximately 58% of the
outstanding shares of Midas Medici. The shares of common stock issued in
connection with the reverse merger were not registered with the
Securities and Exchange Commission and are considered to be restricted
securities.
F-9
NOTE
5 – DEBT
Debt,
including interest rates and maturities, is summarized as follows:
Interest
rates
|
Maturity
|
September
30, 2009
|
December
31, 2008
|
||||||||
12.00% |
1/1/2010
|
$
|
447,106
|
$
|
447,106
|
||||||
10.00% |
12/31/2013
|
62,500
|
62,500
|
||||||||
4.00% |
5/4/2010
|
5,000
|
5,000
|
||||||||
4.00% |
9/23/2009
(1)
|
16,000
|
16,000
|
||||||||
4.00% |
6/2/2009 (2)
|
3,722
|
9,722
|
||||||||
10.00% |
1/15/2014
|
10,000
|
-
|
||||||||
10.00% |
1/15/2014
|
7,500
|
-
|
||||||||
10.00% |
1/15/2014
|
7,500
|
-
|
||||||||
5.00% |
6/30/2012
|
108,969
|
-
|
||||||||
Variable,
3% and 4.68% at September 30, 2009 and
|
|||||||||||
December
31, 2008, respectively
|
8/2/2009 (3)
|
21,310
|
35,070
|
||||||||
Total
long-term debt, including
|
|||||||||||
current
maturities
|
689,607
|
575,398
|
|||||||||
Current
maturities of long-term debt
|
(493,138
|
)
|
(60,792
|
)
|
|||||||
Long-term
debt, less current portion
|
196,469
|
514,606
|
|||||||||
Short-term
debt:
|
|||||||||||
Revolving
credit facility/note payable Utilipoint
|
46,264
|
216,590
|
|||||||||
Revolving
credit facility Intelligent Project, LLC
|
7,500
|
-
|
|||||||||
Short-term
notes payable
|
577
|
-
|
|||||||||
Current
maturities of long-term debt
|
493,138
|
60,792
|
|||||||||
Total
short-term debt
|
547,479
|
277,382
|
|||||||||
Total
debt
|
$
|
743,948
|
$
|
791,988
|
The
$689,607 of total long-term debt including current maturities is due to either
current or former shareholders of the Company. Interest rates are
fixed unless otherwise noted. Variable interest rates are per the
credit union from which the current management shareholder obtained a home
equity loan from which the funds were then loaned to the Company.
Notes
payable to current and former shareholders are unsecured and subordinated to
obligations under credit facility borrowings with the Bank of
Albuquerque. Notes payable to current and former management
shareholders are further subordinated to the $62,500 note to Knox Lawrence
International, LLC (“Knox Lawrence”) due December 31, 2013. Payment terms on
three notes have been revised as follows:
(1)
|
The
$16,000 note payable due September 23, 2009 was restructured on August 1,
2009 in connection with the resignation of the Company executive who holds
the note. Per terms of a separation agreement, the former Company
executive agreed to an extension of terms in the amount of two
installments of $2,000 and $14,000 due December 31, 2009 and January 30,
2010, respectively.
|
(2)
|
The
same former Company executive also agreed to a payment date of September
30, 2009 for the unpaid portion, $3,722 of the $9,722 note due June 2,
2009 of which $6,000 had been paid on June 2, 2009. Payment of the unpaid
portion of $3,722 was made on October 16,
2009.
|
(3)
|
In
connection with the employment agreement of one of the management
shareholders, we have agreed to make a principal payment of $5,000 per
month beginning July 31, 2009 in addition to the normal monthly payment
for the variable rate sub-debt note that is due August 2, 2009 until the
note is paid in full. As of September 30, 2009, the outstanding balance
was $21,310.
|
The Company had a revolving credit facility, used for working
capital needs, with the Bank of Albuquerque from 2005 through mid-2008 at which
point the line expired. The Company had not been in compliance
with debt covenant financial ratios on debt coverage, funded debt to earnings
before interest, taxes, depreciation and amortization (“EBITDA”) and tangible
net worth for years 2007 and 2008. The balance at December 31, 2008
was partially paid down on January 22, 2009 and converted into a short-term note
in the amount of $165,000 due September 30, 2009 with an interest rate of
9.25%. Six monthly consecutive principal payments of $16,500 plus
interest on unpaid principal were due commencing January 15, 2009 with a final
payment of $66,000 plus interest due September 30, 2009. The Company paid the
first five installments and subsequently renegotiated the remaining balance of
principal and interest totaling $82,264 into a new 9.25% note with the Bank of
Albuquerque on September 30, 2009. The 9.25% note matures on December 31, 2009
and will be repaid in 5 principal payments of $9,000 each and one final
principal and interest payment of $37,561. The 9.25% note is an extension /
renewal / modification of the credit facility and as such is secured by the
Company's accounts receivable, fixed assets and a right of offset against cash
accounts held with the bank. As of September 30, 2009, $46,264 was the
outstanding balance of the Company’s 9.25% note with the Bank of
Albuquerque.
F-10
The note
payable of $108,969 represents a loan form KLI-IP Holding, Inc. to IP for
working capital. Interest on this note accrues at an annual percentage rate of
5% and the note matures on June 30, 2012.
In July
2009, IP secured a revolving credit facility with Chase Bank. The credit
facility allows IP to borrow up to $15,000 at an interest rate ranging from
13.24% to 19.24%. Interest accrues at an annual percentage rate of
13.24% for purchases and 19.24% for cash advances and overdraft protection. As
of September 30, 2009, the amount outstanding under this credit facility was
$7,500.
The short
term note payable of $577 at September 30, 2009 represents the remaining balance
of an interest free loan by Knox Lawrence to IP for working capital. This note
was paid in full on October 5, 2009. At September 30, 2009, the balance of $577
was included in “Other current liabilities” in the condensed consolidated
balance sheet.
On
October 14, 2009, the Company, entered into a revolving loan agreement with
Proficio Bank (the “Loan Agreement”). Pursuant to the terms of the Loan
Agreement, the Lender agreed to loan up to $500,000 (the “Loan”) to the Company
which amounts will be evidenced by a Senior Secured Revolving Promissory Note.
The Loan matures on October 14, 2010, unless earlier accelerated upon the
occurrence of an event of default, as such term is defined in the loan
agreement. Interest on the Loan is payable monthly in arrears commencing on
November 1, 2009, at a rate which is equal to the prime rate plus 2.5%, or a
minimum of 6.5%. In the event of default, as such term is defined in
the Loan Agreement; the interest rate shall bear additional interest of
3%. There was no balance outstanding at September 30,
2009.
Interest
expense on notes payable and the revolving credit facilities was $17,797 and
$60,715 for the three and nine months ended September 30, 2009, respectively,
and $19,221 and $47,373 for the three and nine months ended
September 30, 2008, respectively.
The
Company's contractual payments of long-term borrowings at September 30, 2009 are
as follows:
Year
|
Amount
|
|||
2010
|
$ |
493,138
|
||
2011
|
-
|
|||
2012
|
108,969
|
|||
2013
|
62,500
|
|||
2014
|
25,000
|
|||
Total
|
$
|
689,607
|
NOTE
6 - 401(K) PLAN
The
Company maintains a defined contribution retirement plan under Internal Revenue
Code Section 401(k). Substantially all regular full time employees
are eligible to participate in the plan. The Company matches each
eligible employee’s salary reduction contribution up to a limit of
3%. The Company’s contributions were $4,748 and $10,551 for the three
and nine months ended September 30, 2009, respectively, and $6,336 and $22,447
for the three and nine months ended September 30, 2008,
respectively.
NOTE
7 - STOCKHOLDERS’ EQUITY
(a)
Common
Stock Dividends
The
Company may make distributions on the common stock. There has been no common
stock dividends declared as of September 30, 2009. Under the terms of the Loan
Agreement with Proficio Bank (refer to Note 5, Debt), the Company is restricted
from declaring or paying dividends without the prior written consent of the
bank, so long as it may borrow under the Loan Agreement or so long as any
indebtedness remains outstanding under the Loan Agreement.
(b)
Preferred
Stock Dividends
Prior to
the acquisition by Midas Medici on August 21, 2009 Utilipoint was required to
pay preferential cumulative dividends in cash to the holders of Utilipoint’s
Series A Preferred Stock. The Company is in a negative retained earnings
position and therefore the dividends were recorded as a reduction in the APIC
Series A Preferred Stock. As of the acquisition date, August 21, 2009 and
September 30, 2009, $178,208 of stated Series A Preferred Stock dividends had
been paid to the preferred shareholders by Knox Lawrence on behalf of
Utilipoint. Refer to Note 10 (b), Related Party Transactions -
Utilipoint Preferred Dividends.
F-11
The
discount resulting from the increasing rate feature of the Series A Preferred
Stock dividend represents an unstated dividend cost that was being amortized
over the three year dividend payment period using the effective interest method,
by charging the imputed dividend cost against APIC Series A Preferred
Stock. The total stated dividends, whether or not declared, and
unstated dividend cost combined represents a period’s total preferred stock
dividend, which is deducted from net income (loss) to arrive at net loss
available to common shareholders.
On August
21, 2009, all Series A Preferred Stock were exchanged for shares of Midas
Medici. Refer to Note 4, Reverse Merger. Therefore, the preferred stock dividend
payable-accreted was reclassified to additional paid-in capital.
(c)
Loss per Common Share
Basic
loss per share has been computed by dividing net loss available to common
stockholders by the weighted average number of shares of common stock
outstanding during each period. Shares issued during the period and shares
reacquired during the period are weighted for the portion of the period that
they were outstanding. Diluted earnings per share considers the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. Potentially dilutive securities
for the Company include stock options awarded pursuant to the Company’s 2009
Incentive Stock Plan. An aggregate of 465,097 options to purchase shares of
common stock of the Company granted under the Midas Medici Group Holdings, Inc.
Stock Award and Incentive Plan (the “MMGH Plan”) for the three and nine months
ended September 30, 2009 were not included in the computation of diluted
net loss per share because the inclusion of such shares would have an
anti-dilutive effect on the net loss per share. There were no outstanding
options for the three and nine months ended September 30, 2008.
(d)
2009 Stock Award and Incentive Plan
On July
27, 2009, the Board approved the MMGH Plan. The maximum number of shares that
may be issued under the Plan is 650,000. However for a period of ten (10) years
commencing January 1, 2010, the maximum number of shares issuable under the Plan
shall be equal to 20% of the issued and outstanding shares of the Company’s
common stock on a fully diluted basis but shall not be less than 650,000.
Pursuant to the Plan, incentive stock options or non-qualified options to
purchase shares of common stock may be issued. The Plan may be
administered by our board of directors or by a committee to which administration
of the Plan, or part of the Plan, may be delegated by our board of directors.
Options granted under the Plan are not generally transferable by the optionee
except by will, the laws of descent and distribution or pursuant to a qualified
domestic relations order, and are exercisable during the lifetime of the
optionee only by such optionee. Options granted under the Plan vest in such
increments as is determined by our board of directors or designated committee.
To the extent that options are vested, they must be exercised within a maximum
of thirty days of the end of the optionee's status as an employee, director or
consultant, or within a maximum of 12 months after such optionee's termination
or by death or disability, but in no event later than the expiration of the
option term. The exercise price of all stock options granted under the Plan will
be determined by our board of directors or designated committee. With respect to
any participant who owns stock possessing more than 10% of the voting power of
all classes of our outstanding capital stock, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value
on the grant date.
Stock
option awards granted from this Plan are granted at the fair market value on the
date of grant, vest over a period determined at the time the options are
granted, ranging from zero to one year, and generally have a maximum term of ten
years. Certain options provide for accelerated vesting if there is a termination
of employment event for specified reasons set forth in certain employment
agreements. When options are exercised, new shares of the Company’s common
stock, par value $0.001 per share, are issued.
On July
27, 2009 the Company granted options to purchase an aggregate of 247,500 shares
of common stock under the MMGH Plan with a weighted-average exercise price of
$2.27.
On August
21, 2009, the Company completed an offer to exchange Utilipoint stock options
for Midas Medici stock options (the “Exchange”). All previously granted
Utilipoint options were exchanged for new Midas Medici options with a lower
exercise price on a one-for-thirty two basis. Options for an aggregate of 5,400
shares of Utilipoint’s common stock were exchanged. Options granted pursuant to
the Exchange have an exercise price of $1.56 per share and vested on grant date.
The outstanding Utilipoint options were exchanged for 172,597 Midas Medici
options.
Also, on
August 21, 2009, the Company issued options to purchase 45,000 shares
of our common stock to employees and one of our directors at an exercise price
of $6.00 per share.
F-12
A summary
of option activity under the MMGH Plan as of September 30, 2009, and changes
during the nine months then ended is presented below:
Weighted-Average
|
Weighted-Average
Remaining
|
Aggregate
|
||||||||||||||
Shares
|
Exercise
Price
|
Contractual
Term
|
Intrinsic
Value
|
|||||||||||||
Outstanding
at January 1, 2009
|
-
|
$
|
-
|
|||||||||||||
Granted
|
465,097
|
$
|
2.37
|
|||||||||||||
Exercised
|
-
|
$
|
-
|
|||||||||||||
Forfeited
or expired
|
(15,981
|
)
|
$
|
1.56
|
||||||||||||
Outstanding
at September 30, 2009
|
449,116
|
$
|
2.40
|
5.5
|
$
|
1,113,480
|
||||||||||
Expected
to vest at September 30, 2009
|
424,741
|
$
|
2.34
|
5.5
|
$
|
1,070,199
|
||||||||||
Exercisable
at September 30, 2009
|
161,616
|
$
|
1.58
|
5.2
|
$
|
512,855
|
The
weighted-average grant-date fair value of options granted during the nine months
ended September 30, 2009 was $1.39 and was estimated using the
Black-Scholes-Merton option pricing model. We did not have any option plans in
prior years and to date, no option has been exercised.
The fair
value of each stock option grant is estimated on the grant date using the
Black-Scholes-Merton option-pricing model, which incorporates a number of
valuation assumptions noted in the following table, shown at their
weighted-average values:
Expected
dividend yield
|
0
|
%
|
||
Risk-free
rate
|
1.59
|
%
|
||
Expected
stock price volatility
|
103.88
|
%
|
||
Expected
term (years)
|
3.1
|
The
expected volatility is calculated by using the average historical volatility of
companies that management believes are representative of Midas Medici’s business
and market capitalization.
The
expected option term represents the period that stock-based awards are expected
to be outstanding based on the simplified method provided in FASB ASC Topic
718, which averages an award’s weighted-average vesting period and expected term
for share options. The Company will continue to use the simplified method
until it has the historical data necessary to provide a reasonable estimate of
expected life in accordance with FASB ASC Topic 718, as amended by SAB 110.
For the expected option term, the Company used a simple average of the vesting
period and the contractual term for options granted subsequent to
January 1, 2006 as permitted by FASB ASC Topic 718.
For
equity awards to non-employees, the Company also applies the
Black-Scholes-Merton option pricing model to determine the fair value of such
instruments in accordance with FASB ASC Topic 718 and the provisions of
FASB ASC Topic 505-50, “Equity-Based Payments to Non-Employees.” The
options granted to non-employees are re-measured as they vest and the resulting
value is recognized as an adjustment against the Company’s net loss over the
period during which the services are received.
The total
value of the stock option awards is expensed ratably over the vesting period of
the option. As of September 30, 2009, total unrecognized compensation cost
related to stock option awards to be recognized as expense subsequent to
September 30, 2009 was approximately $342,094, and the related
weighted-average period over which it is expected to be recognized was
approximately one (1) year.
The total
fair value of options vested during the nine months ended September 30, 2009 was
$158,684. Stock-based compensation in the amount of $196,375 was expensed for
the three and nine months ended September 30, 2009 and $0 was expensed for the
three and nine months ended September 30, 2008.
F-13
NOTE
8 - COMMITMENTS AND CONTINGENCIES
(a)
Capital
Leases
The
Company is obligated under capital leases for computer equipment that expire on
various dates through December 2012. The minimum payments for the capital leases
in effect at September 30, 2009 are as follows:
Years
Ending December 31,
|
||||
2010
|
$ |
17,838
|
||
2011
|
6,143
|
|||
2012
|
60
|
|||
24,041
|
||||
Less
amount representing interest
|
2,146
|
|||
Present
value of minimum lease payments
|
$
|
21,895
|
||
Short-term
portion
|
$
|
13,493
|
||
Long-term
portion
|
8,402
|
|||
$
|
21,895
|
The
equipment recorded under capital leases was $48,146 and $52,439 at September 30,
2009 and December 31, 2008, respectively. Amortization of capital
leases amounted to $4,012 and $12,607 for the three and nine months ended
September 30, 2009, respectively, and $3,955 and $10,948 for the three and nine
months ended September 30, 2008, respectively. Interest on capital leases
amounted to $621 and $2,140 for the three and nine months ended September 30,
2009, respectively, and $666 and $1,959 for the three and nine months ended
September 30, 2008, respectively.
(b)
Operating Leases
The
Company leases buildings and equipment under various operating leases with lease
terms ranging from one to three years. The following is a schedule of
the future minimum lease payments required under operating leases that have
initial non-cancelable lease terms in excess of one year:
Fiscal
year ending December 31,
|
Minimum
Lease Commitments
|
|||
2009
|
$
|
13,687
|
||
2010
|
10,375
|
|||
$
|
24,062
|
Rent
expense for office space amounted to $36,453 and $74,721 for the three and nine
months ended September 30, 2009, respectively, and $24,113 and $64,471 for the
three and nine months ended September 30, 2008, respectively.
(c)
Litigation
The
Company, in the normal course of business, may be subject to claims and
litigation. Management is not aware of any outstanding claims or
assessments against the Company that are estimable and likely.
NOTE
9 - CONCENTRATION RISKS
(a)
Credit Concentration
Our
demand deposits are placed with major financial
institutions. Management believes the Company is not exposed to undue
credit risk for any demand deposits that may, from time to time, exceed the
federally insured limits.
(b)
Revenue and Accounts Receivable Concentration
For the
nine months ended September 30, 2009, three clients individually represented
approximately 10% each of revenue. For the nine months ended
September 30, 2008, three clients individually represented approximately 12% to
16% each of revenue. Cumulatively, these clients comprised
approximately 30% and 43% of revenue for the nine months ended September 30,
2009 and 2008, respectively. Three clients individually represented
approximately 14% to 17% each and cumulatively 45% of net accounts receivable at
September 30, 2009.
F-14
NOTE
10 - RELATED PARTY TRANSACTIONS
(a)
Utilipoint
Management Fees
Effective
with the acquisition of Utilipoint, management fees to Knox Lawrence of $25,000
per quarter are no longer applicable. At September 30, 2009,
outstanding management fees of $113,978 are due to Knox Lawrence.
(b)
Utilipoint
Preferred Dividends
The net
assets of Utilipoint acquired by the Company on August 21, 2009 included
preferred dividends payable to Knox Lawrence. Knox Lawrence assumed the
obligation to pay the preferred dividends to UTP International, LLC (“UTPI”) on
Utilipoint’s behalf as per the former Utilipoint preferred shareholders’
agreement. Utilipoint’s obligation for preferred dividends therefore became an
obligation to Knox Lawrence. At September 30, 2009, outstanding dividends
payable of $178,208 are due to Knox Lawrence.
(c)
IP Notes Payable
The note
payable of $108,969 represents a loan form KLI-IP Holding, Inc. to IP for
working capital. Interest on this note accrues at an annual percentage rate of
5% and the note matures on June 30, 2012.
The
short-term note payable of $577 at September 30, 2009 represents the remaining
balance of an interest free loan by Knox Lawrence to IP for working capital.
This note was paid in full on October 5, 2009. At September 30, 2009, the
balance of $577 was included in “Other current liabilities” in the condensed
consolidated balance sheet.
(d)
Expense
Reimbursement Agreement
On August
7, 2009, the Company entered into an expense reimbursement agreement (the
“Reimbursement Agreement”) with Knox Lawrence. Pursuant to the Reimbursement
Agreement, Knox Lawrence is authorized to incur up to $350,000 in certain
expenses and obligations on behalf of the Company and the Company agreed to
reimburse Knox Lawrence for such expenses and obligations promptly after
delivery of invoices for such expenses. The Reimbursement Agreement has a term
of one year, subject to earlier termination upon 30 days’ written notice by
either party. Knox Lawrence also allocates expenses for rent and office services
to the Company.
Incurred
and allocated expenses related to office rent, office services and professional
fees for the three and nine months ended September 30, 2009 were $198,058
for which the Company reimbursed Knox Lawrence $166,255. The balance of $31,803
at September 30, 2009 is a component of "Accrued Expenses" on the consolidated
balance sheet. The expenses are a component of “Selling, general and
administrative” operating expenses on the consolidated statements of
operations.
NOTE
11 - SUBSEQUENT EVENTS
As required by FASB ASC Topic 855, “Subsequent Events”, the
Company has evaluated subsequent events through December 23, 2009, which is
the date its September 30, 2009 Condensed Financial Statements were
issued.
On December 23, 2009 we filed an amendment to the 10Q filed on
November 23, 2009.
NOTE
12 - RESTATEMENT
The
Company has restated its financial statements as of and for the three and nine
months ended September 30, 2009 to correct the classification of and related
accounting for the noncontrolling interest in a consolidated subsidiary in the
Intelligent Project, LLC. In accordance with FASB ASC
810-10 Consolidations, the Company is restating its presentation to report
the noncontrolling interest as a separate component of its
Condensed Consolidated Balance Sheet, and Condensed Consolidated
Statement of Stockholders' Deficit and to separately present net income
attributable to the noncontrolling interest in its Condensed Consolidated
Statement of Operations and Comprehensive Loss. There was no change to the
Condensed Consolidated Statement of Cash Flows for the nine months ended
September 30, 2009.
The
effect of the changes related to the above corrections resulted in a decrease in
our net loss attributable to common shareholders of $69,634 and $71,041 for the
three months and nine months ended September 30, 2009, respectively. Our
basic and diluted net loss attributable to common shareholders per share
decreased by $0.05 per share to a loss of $0.32 and $0.64 per share for the
three months and nine months ended September 30, 2009, respectively. The
cumulative effect on our balance sheet was a decrease in the accumulated
deficit and the stockholders’ deficit of the Company of $71,041
as of September 30, 2009. The total deficit at September 30, 2009 remained
unchanged.
The
following tables show the principal financial statement line items initially
reported as of and for the three months and nine months period
ended September 30, 2009, the restatement entries made and balances of the
applicable financial statement items as restated. There was no change
to any other accounts.
As
Reported
|
Adjustments
|
As
Restated
|
||||||||||
Consolidated
Balance Sheet and Statement of Stockholders' Deficit September 30,
2009:
|
||||||||||||
Preferred
stock
|
$
|
-
|
$
|
-
|
||||||||
Common
stock
|
2,736
|
2,736
|
||||||||||
Treasury
stock
|
(40
|
)
|
(40
|
)
|
||||||||
Additional
paid-in capital
|
(187,719
|
)
|
(187,719
|
)
|
||||||||
Accumulated
deficit
|
(1,554,746
|
)
|
$ |
71,041
|
(1,483,705
|
)
|
||||||
Accumulated
other comprehensive income
|
8,480
|
8,480
|
||||||||||
Total
stockholders' deficit
|
(1,731,289
|
)
|
71,041
|
(1,660,248
|
)
|
|||||||
Non-controlling
interest
|
-
|
(71,041
|
)
|
(71,041
|
)
|
|||||||
Total
deficit
|
$
|
(1,731,289
|
)
|
$
|
(1,731,289
|
)
|
||||||
Three
Months Ended September 30, 2009:
|
||||||||||||
Net
loss
|
$
|
(513,434
|
)
|
$
|
(513,434
|
)
|
||||||
Less:
Net loss attributable to the non-controlling interest
|
-
|
$ |
69,634
|
69,634
|
||||||||
Net
loss attributable to Midas Medici Group Holdings, Inc.
|
(513,434
|
)
|
69,634
|
(443,800
|
)
|
|||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||
Preferred
stock stated dividends
|
(41,708
|
)
|
(41,708
|
)
|
||||||||
Preferred
stock dividend accretion
|
(30,377
|
)
|
(30,377
|
)
|
||||||||
Net
loss applicable to common stockholders
|
$
|
(585,519
|
)
|
69,634
|
$
|
(515,885
|
)
|
|||||
Net
loss per common share (basic and diluted)
|
$
|
(0.37
|
)
|
$
|
(0.32
|
)
|
||||||
Weighted
average of common shares outstanding (basic and diluted)
|
1,600,037
|
1,600,037
|
||||||||||
Nine
Months Ended September 30, 2009:
|
||||||||||||
Net
loss
|
$
|
(741,964
|
)
|
$
|
(741,964
|
)
|
||||||
Less:
Net loss attributable to the non-controlling interest
|
-
|
$ |
71,041
|
71,041
|
||||||||
Net
loss attributable to Midas Medici Group Holdings, Inc.
|
(741,964
|
)
|
71,041
|
(670,923
|
)
|
|||||||
Preferred
stock dividends and dividend accretion
|
||||||||||||
Preferred
stock stated dividends
|
(109,958
|
)
|
(109,958
|
)
|
||||||||
Preferred
stock dividend accretion
|
(203,109
|
)
|
(203,109
|
)
|
||||||||
Net
loss applicable to common stockholders
|
$
|
(1,055,031
|
)
|
71,041
|
$
|
(983,990
|
)
|
|||||
Net
loss per common share (basic and diluted)
|
$
|
(0.69
|
)
|
$
|
(0.64
|
)
|
||||||
Weighted
average of common shares outstanding (basic and diluted)
|
1,531,736
|
1,531,736
|
F-15
Report of
Independent Registered Public Accounting Firm
To the
Board of Directors and Stockholders of
Midas
Medici Group Holdings, Inc., formerly Utilipoint International,
Inc.
We have
audited the accompanying consolidated balance sheets of Midas Medici Group
Holdings, Inc. and subsidiaries, formerly Utilipoint International, Inc. and
subsidiary, (the “Company”) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders’ deficit and comprehensive
income (loss), and cash flows for each of the years in the two-year period
ended December 31, 2008. The Company's management is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Midas Medici Group Holdings,
Inc. and subsidiaries, formerly Utilipoint International, Inc. and subsidiary,
as of December 31, 2008 and 2007, and the results of their operations and
their cash flows for each of the years in the two-year period ended
December 31, 2008 in conformity with accounting principles generally accepted in
the United States of America.
As
discussed in Notes 1, 8 and 13, the historical consolidated financial statements
of Utilipoint International, Inc. and subsidiary are now reflected as the
Company on a retroactive basis in conjunction with the reverse merger and all
references to common stock, preferred stock, share and per share amounts have
been retroactively restated.
/s/ REDW LLC
Albuquerque,
New Mexico
August
17, 2009, except for the effects of the reverse merger discussed in Notes 1, 8
and 13,
as
to which
the date is August 21, 2009
F-16
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||
(Formerly
Utilipoint International, Inc. and Subsidiary)
|
||||||||
Consolidated
Balance Sheets
|
||||||||
December
31, 2008 and 2007
|
||||||||
2008
|
2007
|
|||||||
Assets
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$ | 144,546 | $ | - | ||||
Accounts
receivable, net of allowance for doubtful accounts of
$139,305 and $234,183 in 2008 and 2007, respectively |
552,517 | 711,292 | ||||||
Prepaid
expenses and other current assets
|
42,593 | 118,111 | ||||||
Total
Current Assets
|
739,656 | 829,403 | ||||||
Property
and Equipment, net
|
34,266 | 26,040 | ||||||
Other
Assets
|
2,953 | 3,453 | ||||||
Total
Assets
|
$ | 776,875 | $ | 858,896 | ||||
Liabilities
and Stockholders' Deficit
|
||||||||
Liabilities
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 525,461 | $ | 272,803 | ||||
Bank
overdrafts
|
- | 113,937 | ||||||
Line
of credit
|
216,590 | 50,000 | ||||||
Deferred
revenue
|
154,011 | 336,627 | ||||||
Current
portion of long-term debt
|
60,792 | 6,925 | ||||||
Capital
lease obligations - current portion
|
16,242 | 11,844 | ||||||
Preferred
Stock dividends payable - stated
|
68,250 | - | ||||||
Preferred
Stock dividends payable - accretion of accelerated
dividends
and $812,382 balloon dividend
|
395,585 | 116,232 | ||||||
Management
fees payable
|
50,000 | - | ||||||
Deferred
tax liability
|
1,057 | 42,440 | ||||||
Common
stock put options
|
269,000 | 269,000 | ||||||
Other
current liabilities
|
4,242 | 1,985 | ||||||
Total
Current Liabilities
|
1,761,230 | 1,221,793 | ||||||
Long-term
debt, less current portion
|
514,606 | 509,177 | ||||||
Capital
lease obligations, less current portion
|
16,409 | 12,492 | ||||||
Total
Non-current Liabilities
|
531,015 | 521,669 | ||||||
Total
Liabilities
|
2,292,245 | 1,743,462 | ||||||
Stockholders'
Deficit
|
||||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued at December 31, 2008 and 2007 | - | - | ||||||
Common
stock, $0.001 par value; 40,000,000 shares authorized; issued
2,192,094 shares
|
2,192 | 2,136 | ||||||
and
outstanding 1,383,483 shares at December 31, 2008; issued
2,136,160
|
||||||||
and
outstanding 1,381,373 shares at December 31, 2007
|
||||||||
Additional
paid-in capital, net of $231,968 of stock issuance costs
and
|
540,997 | 869,406 | ||||||
accretion
of accelerated dividends and balloon dividend
|
||||||||
Treasury
stock, at cost; 808,611 and 754,787 shares at December 31,
2008
|
(974,015 | ) | (974,015 | ) | ||||
and
December 31, 2007, respectively
|
||||||||
Common
stock put options
|
(269,000 | ) | (269,000 | ) | ||||
Accumulated
other comprehensive income (loss)
|
(2,762 | ) | - | |||||
Accumulated
deficit
|
(812,782 | ) | (513,093 | ) | ||||
Total
Stockholders' Deficit
|
(1,515,370 | ) | (884,566 | ) | ||||
Total
Liabilities and Stockholders' Deficit
|
$ | 776,875 | $ | 858,896 |
See accompanying notes to consolidated financial
statements
F-17
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||
(Formerly
Utilipoint International, Inc. and Subsidiary)
|
||||||||
Consolidated
Statements of Operations
|
||||||||
Years
Ended December 31, 2008 and 2007
|
||||||||
2008
|
2007
|
|||||||
Net
Revenues
|
$ | 3,660,941 | $ | 3,910,392 | ||||
Cost
of Services
|
2,037,046 | 2,149,136 | ||||||
Gross
Margin
|
1,623,895 | 1,761,256 | ||||||
Operating
Expenses
|
||||||||
Selling,
general and administrative
|
1,777,613 | 1,548,028 | ||||||
Depreciation
and amortization
|
17,845 | 10,871 | ||||||
Management
fees
|
100,000 | 25,000 | ||||||
Total
operating expenses
|
1,895,458 | 1,583,899 | ||||||
Operating
income (loss)
|
(271,563 | ) | 177,357 | |||||
Other
Income (Expense)
|
||||||||
Interest
income
|
1 | 1,974 | ||||||
Interest
expense
|
(63,942 | ) | (66,381 | ) | ||||
Other
income
|
- | 850 | ||||||
Total
other income (expense)
|
(63,941 | ) | (63,557 | ) | ||||
Income
(loss) before income taxes
|
(335,504 | ) | 113,800 | |||||
Provision
(benefit) for income taxes
|
(35,815 | ) | 45,737 | |||||
Net
income (loss)
|
(299,689 | ) | 68,063 | |||||
Preferred
stock dividends and dividend accretion
|
||||||||
Preferred
stock stated dividends
|
(136,500 | ) | (34,125 | ) | ||||
Preferred
stock dividend accretion
|
(279,353 | ) | (116,232 | ) | ||||
Net
loss applicable to common stockholders
|
$ | (715,542 | ) | $ | (82,294 | ) | ||
Net
loss per share applicable to common
|
||||||||
stockholders
- basic and diluted
|
$ | (1.05 | ) | $ | (0.08 | ) | ||
Weighted
average common shares outstanding - basic and diluted
|
679,995 | 1,065,779 |
See accompanying notes to consolidated financial
statements
F-18
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||||||||||||||||||||||||||||||||||
(Formerly
Utilipoint International, Inc. and Subsidiary)
|
||||||||||||||||||||||||||||||||||||||||
Consolidated
Statements of Stockholders' Deficit and Comprehensive Income
(Loss)
|
||||||||||||||||||||||||||||||||||||||||
Years
Ended December 31, 2008 and 2007
|
||||||||||||||||||||||||||||||||||||||||
Common
Stock
|
Additional
Paid in
|
Treasury Stock
|
Common
Stock Put
|
Accumulated
|
Accumulated
Other Comprehensive
|
Total
Stockholders'
|
Comprehensive
|
|||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Shares | Amount | Options | Deficit | Income (Loss) | Deficit | Income (Loss) | |||||||||||||||||||||||||||||||
Balance
- December 31, 2006
|
1,407,870 | $ | 1,408 | $ | 145,712 | 44,427 | $ | (4,639 | ) | $ | - | $ | (581,156 | ) | $ | - | $ | (438,675 | ) | |||||||||||||||||||||
Net
income
|
68,063 | 68,063 | $ | 68,063 | ||||||||||||||||||||||||||||||||||||
Issuance
of shares upon reorganization
|
687,922 | 688 | 1,049,312 | 1,050,000 | ||||||||||||||||||||||||||||||||||||
Purchase
of shares upon reorganization
|
687,922 | (967,031 | ) | (967,031 | ) | |||||||||||||||||||||||||||||||||||
Stock
compensation upon reorganization
|
40,368 | 40 | 56,707 | 56,747 | ||||||||||||||||||||||||||||||||||||
Issuance of 191,390 common stock put options upon reorganization | (269,000 | ) | (269,000 | ) | ||||||||||||||||||||||||||||||||||||
Stock
issuance costs
|
(231,968 | ) | (231,968 | ) | ||||||||||||||||||||||||||||||||||||
Purchase
of shares
|
22,437 | (2,345 | ) | (2,345 | ) | |||||||||||||||||||||||||||||||||||
Stated
dividends on preferred stock
|
(34,125 | ) | (34,125 | ) | ||||||||||||||||||||||||||||||||||||
Accretion of accelerated and balloon dividends on preferred stock | (116,232 | ) | (116,232 | ) | ||||||||||||||||||||||||||||||||||||
Balance
- December 31, 2007
|
2,136,160 | 2,136 | 869,406 | 754,787 | (974,015 | ) | (269,000 | ) | (513,093 | ) | - | (884,566 | ) | $ | 68,063 | |||||||||||||||||||||||||
Net
loss
|
(299,689 | ) | (299,689 | ) | $ | (299,689 | ) | |||||||||||||||||||||||||||||||||
Issuance
of shares
|
39,953 | 40 | 62,460 | 62,500 | ||||||||||||||||||||||||||||||||||||
Issuance
of shares for professional services
|
15,981 | 16 | 24,984 | 25,000 | ||||||||||||||||||||||||||||||||||||
Purchase
of shares
|
53,824 | - | - | |||||||||||||||||||||||||||||||||||||
Stated
dividends on preferred stock
|
(136,500 | ) | (136,500 | ) | ||||||||||||||||||||||||||||||||||||
Accretion of accelerated and balloon dividends on preferred stock | (279,353 | ) | (279,353 | ) | ||||||||||||||||||||||||||||||||||||
Foreign
currency translation
|
(2,762 | ) | (2,762 | ) | (2,762 | ) | ||||||||||||||||||||||||||||||||||
Balance
- December 31, 2008
|
2,192,094 | $ | 2,192 | $ | 540,997 | 808,611 | $ | (974,015 | ) | $ | (269,000 | ) | $ | (812,782 | ) | $ | (2,762 | ) | $ | (1,515,370 | ) | $ | (302,451 | ) |
See accompanying notes to consolidated financial
statements
F-19
Midas
Medici Group Holdings, Inc. and Subsidiaries
|
||||||||
(Formerly
Utilipoint International, Inc. and Subsidiary)
|
||||||||
Consolidated
Statements of Cash Flows
|
||||||||
Years
Ended December 31, 2008 and 2007
|
||||||||
2008
|
2007
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
income (loss)
|
$ | (299,689 | ) | $ | 68,063 | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
17,845 | 10,871 | ||||||
Provision
for uncollectible accounts
|
3,425 | 99,303 | ||||||
Stock
based compensation
|
- | 56,747 | ||||||
Issuance
of stock for professional services
|
25,000 | - | ||||||
Deferred
taxes
|
(41,383 | ) | 42,440 | |||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
155,350 | (147,787 | ) | |||||
Prepaid
expenses and other current assets
|
75,519 | (105,512 | ) | |||||
Accounts
payable and accrued expenses
|
252,659 | 72,304 | ||||||
Deferred
revenue
|
(182,616 | ) | (57,017 | ) | ||||
Management
fees payable
|
50,000 | - | ||||||
Other
|
6,813 | 1,853 | ||||||
Total
adjustments
|
362,612 | (26,798 | ) | |||||
Net
cash provided by operating activities
|
62,923 | 41,265 | ||||||
INVESTING
ACTIVITIES
|
||||||||
Additions
to property and equipment
|
(3,168 | ) | - | |||||
FINANCING
ACTIVITIES
|
||||||||
Net
borrowings on line of credit
|
163,738 | 25,000 | ||||||
Change
in bank overdrafts
|
(113,937 | ) | 113,937 | |||||
Principal
payments on capital lease obligations
|
(14,480 | ) | (8,497 | ) | ||||
Principal
payments on notes payable
|
(129,408 | ) | (3,810 | ) | ||||
Proceeds
from notes payable
|
187,500 | - | ||||||
Proceeds
from issuance of preferred stock, net of stock issuance
costs
|
- | 885,994 | ||||||
Proceeds
from issuance of common stock
|
62,500 | - | ||||||
Stock
issuance costs for common stock transactions upon
reorganization
|
- | (67,962 | ) | |||||
Purchase
of treasury stock
|
- | (969,376 | ) | |||||
Distribution/dividend
to preferred stockholders
|
(68,250 | ) | (34,125 | ) | ||||
Net
cash provided (used) by financing activities
|
87,663 | (58,839 | ) | |||||
Net
increase (decrease) in cash and cash equivalents
|
147,418 | (17,574 | ) | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
(2,872 | ) | - | |||||
Cash
and cash equivalents beginning of year
|
- | 17,574 | ||||||
Cash
and cash equivalents end of year
|
$ | 144,546 | $ | - | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the year for:
|
||||||||
Interest
|
$ | 55,886 | $ | 66,381 | ||||
Taxes
|
$ | 4,144 | $ | 1,312 | ||||
Supplemental
disclosure of non-cash financing and investing activities:
|
||||||||
Property
and equipment acquired under capital leases
|
$ | 22,794 | $ | 23,469 |
See accompanying notes to consolidated financial
statements
F-20
Midas
Medici Group Holdings, Inc. and Subsidiaries
(Formerly Utlilipoint International, Inc. and
Subsidiary)
Notes to Consolidated Financial
Statements
December 31, 2008 and 2007
1. DESCRIPTION OF BUSINESS
Midas
Medici Group Holdings, Inc. (“Midas Medici”), together with its subsidiaries
(the “Company”), is a utility and energy consulting, and issues analysis firm.
The Company offers public issues and regulatory management, advanced metering
infrastructure and meter data management, rates and demand response, utility
energy and
technology, trading and risk management, and energy investment services. It
provides its services to energy companies, utilities, investors, regulators, and
industry service providers primarily in North America and Europe.
In
connection with the reverse merger (refer to Note 13, Subsequent Events – Merger
Transaction), Utilipoint International Inc. (“Utilipoint”) became our
wholly-owned subsidiary. Utilipoint was founded as Reddy Corporation
International in 1933 and in 1998 was acquired by Scientech LLC. The
name was changed to Utilipoint in 2002 in conjunction with a management
buyout. In July 2007, Utilipoint reorganized and received equity
funding from Knox Lawrence International, LLC (“KLI”) and UTP International, LLC
(“UTPI”), a KLI company, which together held a controlling interest. Utilipoint
is based in Albuquerque, New Mexico and is incorporated under the laws of the
State of New Mexico. Utilipoint established a wholly owned
subsidiary, Utilipoint, s.r.o., in the Czech Republic on October 3,
2008.
The
historical consolidated financial statements of Utilipoint are now reflected as
the Company on a retroactive basis for all periods presented in conjunction with
the reverse merger.
2.
LIQUIDITY
The
Company has incurred cumulative losses through December 31, 2008 totaling
$812,782 and subsequent unaudited interim financial statements reflect
continuing losses. Also, the Company ended 2008 with negative working capital of
$1,021,574. The Company has funded its operations since inception through the
use of cash obtained principally from stockholders and third party financings.
The Company is in the process of improving operational results and raising
external financing to provide working capital which management believes will
enable it to operate profitably and to solve its liquidity constraints on a
go-forward basis in a sustainable manner. Management actions and
plans for improving operational results and liquidity include the
following:
Merger
Transaction – On August 21, 2009, the Company consummated a merger
transaction (refer to Note 13, Subsequent Events – Merger
Transaction). The merger allows for access to capital for the
Company.
Increased
Staff Utilization – The Company has begun implementing definitive plans
to increase staff utilization which management believes will improve
margins.
Increased
Business Development and Executive Leadership Resources – In July 2009,
with the Capital Contribution Agreement with The Intelligent Project, LLC (refer
to Note 13, Subsequent Events – Capital Contribution Agreement with The
Intelligent Project, LLC), two veteran executives joined the
Company. The addition of these individuals significantly increased
the Company’s resources in business development and executive
leadership. With the merger transaction (refer to Note 13, Subsequent
Events – Merger Transaction), two executives of Midas Medici are also expected
to contribute to the business development efforts of the Company via their
extensive relationships and contacts in the energy
industry. Management believes this addition of executives from The
Intelligent Project, LLC and Midas Medici will significantly increase the
Company’s revenues and profits while optimizing how it manages its
operations.
Continued
Support from a Significant Shareholder – The Company has historically
received financial support from KLI for working capital. Over the eighteen
months ended June 30, 2009, KLI provided financial support in the form of a
$62,500 note payable and $62,500 stock purchase, deferred $100,000 in management
fees (see also Note 11), and deferred $136,500 in dividends which it paid on
behalf of the Company to UTPI. KLI is committed to continue to
provide support when needed on a going forward basis.
Deferring
of Insider Obligations – The Company has on its books, as of June 30,
2009, current debt obligations due to insiders of approximately
$500,000. The Company believes that its insiders are going to
continue deferring their obligations until the Company generates internal cash
flows or procures outside financing.
F-21
Management
believes it will be successful in completing the foregoing actions which will
enable the Company to run its business in a sustainable manner through December
31, 2009 and beyond and will result in increased revenues, profits and cash
flow.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation - The accompanying consolidated financial statements have
been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”). All material intercompany accounts and transactions have
been eliminated.
Fair Value of
Financial Instruments - The carrying amounts of the Company’s financial
instruments, which include cash and cash equivalents, accounts receivable,
prepaid expenses and other current assets, accounts payable, bank overdrafts,
other current liabilities, line of credit and debt, approximate their fair
values due to their short maturities and variable interest rate on the line of
credit and fixed rates which approximate market on significant notes
payable. Based on borrowing rates currently available to the Company
for loans with similar terms, the carrying value of capital lease obligations
approximates fair value. The fair value of put options is discussed
in Note 8.
Revenue
Recognition - The Company’s primary revenue streams and the basis on
which revenue is recognized for each are as follows:
Fixed-Price
Contracts
Fixed
price contracts are projects where services are provided at an agreed to price
for defined deliverables. On occasion, clients with fixed price
contracts will require an accounting of all hours worked on a project at an
agreed to hourly rate to accompany an invoice.
The
Company recognizes revenue when a deliverable is provided except in the case
where the client requires time reporting to accompany invoices. In
that case, the Company recognizes revenue up to the amount the time records
support, because clients requiring time reporting with hourly rates on fixed
price contracts typically can only ask for refunds on fixed price projects up to
the amount determined as if the contract had been time and materials. With
acceptance of the final deliverable, all revenue is recognized.
Bundled
Service Agreements (“BSAs”)
BSAs are
packages of services that clients subscribe to, typically on an annual contract
basis. The services typically include a combination of the
following:
§
|
Access
to subject matter experts as needed, by
telephone
|
§
|
Discounted
fees for Company events
|
§
|
Advertising
space on the IssueAlert®
e-publication
|
§
|
One
to three reports and/or whitepapers on industry
topics
|
§
|
Briefings
on industry trends and research
findings
|
BSAs also
include annual memberships in the Advanced Metering Infrastructure and Meter
Data Management (“AMI MDM”) forum and corporate contracts. The AMI MDM forum is
designed for electric, water, and/or gas utilities, regulators, utility
governing boards, independent system operators and consumer advocacy groups to
come together and discuss meter data management successes, problems, issues,
interfaces and best practices. Corporate contracts are
characterized by an annual contract for a pre-defined amount of market research
hours. Clients of this service receive access to the Company’s
directory and InfoGrid products. The primary service is the block of hours
purchased.
F-22
The
Company believes that the substance of BSAs, as pointed out in a recent survey
of its clients, is that the purchaser pays for a service that is delivered over
time. As a result, revenue recognition occurs over the subscription
period, or in the case of corporate contracts as the hours are utilized,
reflecting the pattern of provision of service.
Time
and Materials Contracts (“T&M”)
T&M
are services billed at a set hourly rate. Project related expenses
are passed through at cost to clients. Normally clients
are invoiced on monthly basis. The Company recognizes revenue as
billed unless the project has a major deliverable(s) associated with it, in
which case the revenue is deferred until the major deliverable(s) is
provided.
Events
and Sponsorships
The
Company hosts events such as conferences. These events include
revenues from sponsorships and registration fees which are recognized in the
month of the event. Revenues from sponsors of the AMI MDM forum are
recognized over the annual subscription period, reflecting the pattern of
provision of service.
Property and
Equipment - Property and equipment is carried at cost, less accumulated
depreciation and amortization. Depreciation and amortization is calculated using
the straight-line method over the useful lives that typically range from three
to ten years. Equipment under capital leases is amortized over the
lease term which is typically three years and is removed from the Company’s
accounting records upon lease termination.
Foreign Currency
Translation and Transactions - The U.S. dollar is the reporting currency
for all periods presented. The financial information for the entity outside the
United States is measured using the local currency as the functional currency.
Assets and liabilities for the Company’s foreign entity are translated into U.S.
dollars at the exchange rate in effect on the respective balance sheet dates,
and revenues and expenses are translated into U.S. dollars based on the average
rate of exchange for the corresponding period. Exchange rate differences
resulting from translation adjustments are accounted for as a component of
accumulated other comprehensive income. Gains and (losses) from foreign currency
transactions are reflected in the consolidated statements of operations under
the line item selling, general and administrative expense, and were ($7,658) and
$9,809, in 2008 and 2007, respectively. Such foreign currency transactions
include primarily billings denominated in foreign currencies by the Company’s
U.S. subsidiary, which are reported based on the applicable exchange rate in
effect on the balance sheet date. The related deferred revenue from such
billings is reported in U.S. dollars at the exchange rate in effect at the
billing dates when the revenue was deferred.
Comprehensive
Income (Loss) - Comprehensive income
(loss) consists of net loss or gains on foreign currency translations and net
income or loss from operations and is presented in the consolidated statements
of stockholders’ deficit. This includes charges and credits to equity that are
not the result of transactions with stockholders. Included in other
comprehensive income (loss) are the cumulative translation adjustments related
to the net assets of the operations of the Company’s foreign subsidiary. These
adjustments are accumulated within the consolidated statements of stockholders’
deficit under the caption “Other Comprehensive Loss.” Other comprehensive loss
for the year ended December 31, 2008 was $2,762. The Company’s foreign
subsidiary was established in 2008 and accordingly there is no comprehensive
income or loss for 2007.
Stock-Based
Compensation - Effective January 1,
2006, the Company adopted the fair value recognition provisions of SFAS No.
123(R), Share-Based Payment, using the modified prospective transition method.
Under the transition method, compensation expense that the Company recognizes
includes expense associated with the fair value of share based awards
granted.
Allowance for
Doubtful Accounts - Reserves for bad debt
are based on evaluation of customers’ ability to meet their financial
obligations to the Company. When evaluation indicates that the
ability to pay is impaired, a specific allowance against amounts due is recorded
thereby reducing the net recognized receivable to the amount the Company
reasonably believes will be collected. When management determines
that receivables are not collectible, the gross receivable is written off
against the reserve for bad debt.
F-23
Income
Taxes - The current or deferred tax consequences of all events that have
been recognized in the financial statements are measured based on provisions of
enacted tax law to determine the amount of taxes payable or refundable in future
periods. Effective with the July 2007 reorganization, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between financial statement carrying amounts of
existing assets and liabilities, and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted
tax rates for the years in which those temporary differences are expected to be
recovered or settled. The effect of a change in tax rates on deferred
tax assets and liabilities is recognized into income during the period that
includes the enactment date. A valuation allowance is established to
reduce deferred tax assets if it is more likely than not that all, or some
portion of, such deferred tax assets will not be realized. The
Company accounts for uncertain tax positions in accordance with Financial
Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income
Taxes — an Interpretation of FASB Statement No. 109, (“FIN
48”). FIN 48 prescribes a recognition threshold and measurement
attribute for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. The Company does not believe it
has any material unrecognized income tax positions.
Prior to
reorganization in July 2007, the Company was an S corporation. Under
this election, the Company’s taxable income flowed through to the stockholders
and was not the responsibility of the Company. Upon reorganization,
the Company became a C corporation and is responsible for its own income
taxes.
The
Company is a cash basis taxpayer.
Cost of Services
- Cost of
services represents direct job costs plus direct labor and related benefits and
payroll taxes. The Company allocates employee labor between direct and indirect
based upon a factor of billable employee payroll dollars multiplied by an
estimated labor utilization rate of 80%. As such, payroll dollars are
categorized as cost of services and selling, general and administrative
expense.
Segment
Reporting -
Operating segments are defined as components of an enterprise for which
separate financial information is available and evaluated regularly by the chief
operating decision maker, or decision making group, in deciding the method to
allocate resources and assess performance. The Company currently has one
reportable segment for financial reporting purposes, which represents the
Company's core business as a utility and energy consulting, and issues analysis
firm. The Company does not report revenue by product or service or groups of
products or services because it is impracticable to do so.
Use of Estimates
- The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Significant estimates include: allowances for doubtful
accounts, fair value of common stock put options, certain revenue recognition
methodologies related to contract deliverables, valuation allowances for
deferred tax assets, rates at which deferred tax assets and liabilities are
expected to be recorded or settled, accruals for paid time off and the estimated
labor utilization rate used to determine cost of services.
Recently Issued
Accounting Standards – In September 2006, the
FASB issued Statement of Financial Account Standards No. 157, Fair Value Measurements
(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for
measuring fair value in accordance with accounting principles generally accepted
in the United States, and expands disclosures about fair value measurements. The
Company adopted SFAS 157 during the first quarter of 2008, and the
implementation did not have a material impact on the Company’s financial
condition, results of operations, or cash flows. The Company has deferred the
adoption of SFAS 157 until fiscal year beginning January 1, 2009 with
respect to non-financial assets and liabilities in accordance with the
provisions of FASB Staff Position (“FSP”) No. 157-2, Effective Date of FASB Statement
No. 157 (“FSP FAS 157-2”) effective February 2008. Such
non-financial assets and liabilities include goodwill and intangible assets with
indefinite lives. The adoption of FSP FAS 157-2 is not expected to
have a material impact on the Company's consolidated financial
statements.
F-24
In
February 2007, the FASB issued Statement of Financial Account Standards No. 159,
The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to
measure eligible assets and liabilities at fair value as of specified
dates. Subsequent unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. The objective
of SFAS 159 is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The Company adopted SFAS 159 on
January 1, 2008 and did not elect to apply the fair value method to any eligible
assets or liabilities at that time.
In December 2007, FASB
issued Statement of Financial Accounting Standards No. 141 (revised 2007),
Business Combinations
(“SFAS 141R”). SFAS 141R moves closer to a fair value model by
requiring the acquirer, in a business combination, to measure all assets
acquired and all liabilities assumed at their respective fair values at the date
of acquisition, including the measurement of non-controlling interests at fair
value. SFAS 141R also establishes principles and requirements as to how the
acquirer recognizes and measures goodwill acquired in a business combination or
a gain from a bargain purchase and determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. In addition, SFAS 141R significantly
changes the accounting for business combinations in a number of areas, including
the treatment of contingent consideration, pre-acquisition contingencies,
in-process research and development, restructuring costs, and requires the
expensing of acquisition-related costs as incurred. The effective date of
SFAS 141R is for fiscal years beginning after December 15, 2008. For
transactions consummated after the effective date of SFAS 141R, prospective
application of the new standard is applied. For business combinations
consummated prior to the effective date of SFAS 141R, the guidance in
SFAS 141 is applied. The adoption of this new standard is not expected to
have a material impact on the Company's consolidated financial
statements.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Noncontrolling
Interests in Consolidated Financial Statements—An Amendment of ARB
No. 51 (“SFAS 160”). SFAS 160 establishes new accounting
and reporting standards for the non-controlling interest in a subsidiary and for
the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years
beginning on or after December 15, 2008. The adoption of this new standard
did not have a material impact on the Company's consolidated financial
statements.
In March
2008, the FASB issued Statement of Financial Account Standards No. 161,
Disclosure about Derivative
Instruments and hedging Activities—An Amendment of FASB Statement
No. 133 (“SFAS 161”). SFAS 161 expands and amends the
disclosure requirement for derivative instruments and hedging activities.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The Company is in the
process of determining what effect, if any, the application of the provisions of
SFAS 161 will have on its consolidated financial
statements.
In June
2008, the FASB issued FSB EITF 03-6-1, Determining whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(“EITF 03-6-1”), to clarify that all outstanding unvested share-based
payment awards that contain non-forfeitable rights to dividends or dividend
equivalents, whether paid or unpaid, are participating securities. An entity
must include participating securities in its calculation of basic and diluted
earnings per share pursuant to the two-class method as described in SFAS
No. 128, Earnings Per
Share. EITF 03-6-1 is effective for fiscal years beginning after
December 15, 2008. The Company is in the process of determining what
effect, if any, the application of EITF 03-6-1 will have on its
consolidated financial statements.
In May
2009, the FASB issued Statement of Financial Account Standards No. 165,
Subsequent Events
(“SFAS 165”). SFAS 165 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be
issued. SFAS 165 is effective for financial statements issued
for fiscal years and interim periods beginning after June 15, 2009. The
adoption of SFAS 165 is not expected to have a material impact on the Company's
consolidated financial statements.
F-25
4.
BALANCE SHEET ITEMS
Cash
and Cash Equivalents
Cash and
cash equivalents consists primarily of cash in banks.
Prepaid
Expenses and Other Current Assets
At
December 31, prepaid expenses and other current assets were as
follows:
2008
|
2007
|
|||||||
Prepaid
management fees
|
$
|
-
|
$
|
25,000
|
||||
Due
from stockholder for shares issued
|
-
|
56,747
|
||||||
Foreign
income tax refunds due
|
15,652
|
14,583
|
||||||
Receivable
from former employee
|
20,000
|
-
|
||||||
Other
|
6,941
|
21,781
|
||||||
$
|
42,593
|
$
|
118,111
|
Property
and Equipment
At
December 31, property and equipment consists of the following:
Estimated
Useful
Life
|
2008
|
2007
|
|||||||
Office
equipment
|
3
years
|
$
|
7,758
|
$
|
5,347
|
||||
Furniture
and fixtures
|
10
years
|
6,257
|
5,500
|
||||||
Equipment
under capital leases
|
3
years
|
52,439
|
36,315
|
||||||
66,454
|
47,162
|
||||||||
Accumulated
depreciation
|
(9,839
|
)
|
(7,313
|
)
|
|||||
Accumulated
amortization of
equipment under capital leases
|
(22,349
|
)
|
(13,809
|
)
|
|||||
$
|
34,266
|
$
|
26,040
|
Property
and equipment are stated at cost. Depreciation and amortization is
provided on the straight-line method over the estimated useful lives of the
assets. Depreciation expense was $2,635 and $1,232 for fiscal years
2008 and 2007, respectively. Amortization expense was $15,210 and
$9,639 for fiscal years 2008 and 2007, respectively.
Other
Assets
Other
assets consist of deposits on leased office space.
Accounts
Payable and Accrued Expenses
At
December 31, accounts payable and accrued expenses consists of the
following:
2008
|
2007
|
|||||||
Accounts
payable
|
$
|
336,906
|
$
|
172,446
|
||||
Accrued
payroll and vacation
|
163,207
|
100,357
|
||||||
Other
|
25,348
|
-
|
||||||
$
|
525,461
|
$
|
272,803
|
Deferred
Revenue
Deferred
revenue consists primarily of amounts received from or billed to clients in
conjunction with BSAs, T&M and fixed price contracts for which revenue is
recognized over time or upon completion of contract deliverables.
F-26
Other
Current Liabilities
Other
current liabilities consist of sales taxes payable and minimum state taxes due
regardless of income.
5.
DEBT
Debt,
including interest rates and maturities is summarized as follows at December
31:
Interest
Rates
|
Maturity
|
2008
|
2007
|
|||||
Long-term
debt – notes payable:
|
||||||||
12.00%
|
01/01/2010
|
$ |
447,106
|
$ |
447,106
|
|||
10.00%
|
12/31/2013
|
62,500
|
-
|
|||||
4.00%
|
05/04/2010
|
5,000
|
5,000
|
|||||
4.00%
|
09/23/2009
|
16,000
|
16,000
|
|||||
4.00%
|
06/02/2009
|
9,722
|
8,518
|
|||||
Variable,
4.68% and 8.15% at December 31, 2008 and 2007,
respectively
|
08/02/2009
|
35,070
|
39,478
|
|||||
Total
long-term debt, including current maturities
|
575,398
|
516,102
|
||||||
Current
maturities of long-term debt
|
(60,792
|
) |
(6,925
|
)
|
||||
Total
long-term debt
|
514,606
|
509,177
|
||||||
Short-term
debt:
|
||||||||
Line
of credit
|
216,590
|
50,000
|
||||||
Current
maturities of long-term debt
|
60,792
|
6,925
|
||||||
Total
short-term debt
|
277,382
|
56,925
|
||||||
Total
debt
|
$ |
791,988
|
$ |
566,102
|
All notes
payable are due to either current or former shareholders of the
Company. Interest rates are fixed unless otherwise
noted. Variable interest rates are per the credit union from which
the current management shareholder obtained a home equity loan from which the
funds were then loaned to the Company.
Notes
payable to current and former shareholders are unsecured and subordinated to
obligations under the Company’s line of credit with the Bank of
Albuquerque. Notes payable to current and former management
shareholders are further subordinated to the $62,500 note to KLI due December
31, 2013.
The
Company had a revolving line of credit, used for working capital needs, with the
Bank of Albuquerque from 2005 through mid-2008 at which point the line
expired. The Company had not been in compliance with debt covenant
financial ratios on debt coverage, funded debt to earnings before interest,
taxes, depreciation and amortization (“EBITDA”) and tangible net worth for years
2007 and 2008. The weighted average interest rate on the line of credit
was 5.63% and 8.83% for 2008 and 2007, respectively. The balance at December 31,
2008 was partially paid down on January 22, 2009 and converted into a short-term
note in the amount of $165,000 due June 30, 2009 with an interest rate of
9.25%. Six monthly consecutive principal payments of $16,500 plus
interest on unpaid principal were due commencing January 15, 2009 with a final
payment of $66,000 plus interest due June 30, 2009. The Company
paid the first five installments and subsequently renegotiated the remaining
balance of principal and interest totaling $82,264 into a new 9.25% note with
the Bank of Albuquerque on June 30, 2009. The 9.25% note matures on
December 31, 2009 and will be repaid in 5 principal payments of $9,000 each
and one final principal and interest payment of $37,561. The 9.25% note is an
extension / renewal / modification of the credit facility and as such is secured
by the Company’s accounts receivable, fixed assets and a right of offset against
cash accounts held with the bank.
F-27
Interest
expense on notes payable and the line of credit was $61,265 and $64,433 for
fiscal years 2008 and 2007, respectively.
The
Company's contractual payments of long-term borrowings at December 31, 2008 are
as follows:
Year
|
Amount
|
|||
2009
|
$ | 60,792 | ||
2010
|
452,106 | |||
2011
|
- | |||
2012
|
- | |||
2013
|
62,500 | |||
Total
|
$ | 575,398 |
6. INCOME
TAXES
Since
reorganization on July 23, 2007, the Company is a C-corporation, cash basis
taxpayer. Previously, the Company was an S-corporation whereby its tax burden
flowed through to its shareholders. The Company files state tax returns in New
Mexico where it is domiciled, and other states where it has nexus.
As a
result of operating losses incurred for tax purposes in 2007 (after July 23,
2007) and 2008, the Company has no current liability for federal or state income
taxes in those years (other than minimum state taxes due regardless of
income).
A
reconciliation of income tax expense using the statutory federal and state
income tax rates is as follows for the years ended December 31:
2008
|
2007
|
|||||||
Federal
tax at statutory rates
|
$
|
(114,071
|
)
|
$
|
38,692
|
|||
State
tax at statutory rates
|
(20,130
|
)
|
6,828
|
|||||
Increase
(decrease) in tax due to:
|
||||||||
S-corporation
income taxable to shareholders
|
-
|
(74,158
|
)
|
|||||
Nondeductible
expenses
|
6,988
|
8,869
|
||||||
Change
in deferred tax asset valuation allowance
|
35,531
|
63,113
|
||||||
Effect
of difference between statutory rates and
|
||||||||
graduated
rates used to calculate deferred taxes
|
50,533
|
414
|
||||||
Other
|
5,334
|
1,979
|
||||||
Income
tax expense (benefit)
|
$
|
(35,815
|
)
|
$
|
45,737
|
Deferred
income taxes reflect the tax consequences in future years for differences
between the tax basis of assets and liabilities and their basis for financial
reporting purposes. Temporary differences giving rise to the deferred
tax assets and liabilities relate in part to accrual-to-cash adjustments, as the
Company follows the accrual basis of accounting for financial reporting but the
cash basis for tax purposes. Deferred tax assets arise from net
operating losses, and from temporary differences in depreciation and
amortization and from equipment leases capitalized on the financial statements
but treated as operating leases for tax purposes. A deferred tax
liability arises from the net income of a wholly owned foreign corporation
(Utilipoint s.r.o.), which becomes taxable in the United States upon
repatriation of the funds. Deferred tax assets and liabilities were
calculated using the graduated rates anticipated in the years tax assets and
liabilities are anticipated to reverse. The reversal of timing
differences requires significant estimation; accordingly, deferred tax assets
and liabilities may reverse at tax rates significantly different than
anticipated.
F-28
As a
result of net losses incurred and because the likelihood of being able to
utilize these losses is not presently determinable, the Company has recorded a
valuation allowance to fully reserve its deferred tax asset. If in
the future the Company were to determine that it would be able to realize its
deferred tax assets in excess of its net recorded amount, an adjustment would
increase income in such period or, if such determination were made in connection
with an acquisition, an adjustment would be made in conjunction with the
allocation of the purchase price.
At
December 31, 2008 and 2007 the significant components of the Company’s deferred
tax assets and liabilities were:
2008
|
2007
|
|||||||
Deferred
tax assets:
|
||||||||
Net
operating loss carryforwards
|
$
|
12,012
|
$
|
4,632
|
||||
Accrual
to cash adjustments
|
53,980
|
-
|
||||||
Depreciation
and amortization adjustments
|
29,360
|
48,938
|
||||||
Leases
not capitalized for tax purposes
|
3,292
|
9,543
|
||||||
Total
deferred tax assets
|
98,644
|
63,113
|
||||||
Valuation
allowance
|
(98,644
|
)
|
(63,113
|
)
|
||||
Total
deferred tax assets net of valuation allowance
|
$
|
-
|
$
|
-
|
||||
Deferred
tax liabilities:
|
||||||||
Accrual
to cash adjustments
|
$
|
-
|
$
|
(42,440
|
)
|
|||
Wholly
owned foreign corporation
|
(1,057
|
)
|
-
|
|||||
Total
deferred tax liability
|
$
|
(1,057
|
)
|
$
|
(42,440
|
)
|
||
Deferred
tax expense (benefit)
|
$
|
(41,383
|
)
|
$
|
42,440
|
In
addition to the deferred tax expense (benefit), provision (benefit) for income
taxes on the accompanying consolidated statements of operations includes $5,568
and $3,297 in 2008 and 2007, respectively, of minimum state taxes due regardless
of income.
Availability
to Offset Future Taxes
Deferred
tax assets arising from net operating losses and accrual to cash adjustments are
available to offset future taxes beginning with the first year following their
creation. Deferred tax assets arising from depreciation and
amortization differences and leases not capitalized become available in future
years according to their respective amortization schedules.
Net
Operating Loss Carryforwards
The
Company has net operating loss carryforwards totaling $45,582 that may be used
to offset against future taxable income, subject to change in ownership
limitations. If not used, the carryforwards will expire as
follows:
2027
|
$ | 11,813 | ||
2028
|
33,769 | |||
$ | 45,582 |
Tax
Examinations
Since
July 2007 when the Company became a C-corporation, there have been no
examinations conducted by the Internal Revenue Service and accordingly the
C-corporation returns for years 2007 and 2008 remain open for
examination. The S-corporation returns for 2006 and 2007 are also
open for examination.
7. 401(K)
PLAN
The
Company maintains a defined contribution retirement plan under Internal Revenue
Code Section 401(k). Substantially all regular full time employees
are eligible to participate in the plan. The Company matches each
eligible employee’s salary reduction contribution up to a limit of
3%.
The
matching contributions by the Company included in selling, general and
administrative expenses were $27,560 and $40,128 for fiscal years 2008 and 2007,
respectively.
F-29
8. STOCKHOLDERS’
DEFICIT
In
accordance with the reverse merger on August 21, 2009 (refer to Note 13,
Subsequent Events – Merger Transaction), an aggregate of 1,348,516 shares with a
par value of $.001 of Midas Medici were issued to Utilipoint shareholders in
exchange for 42,191 Utilipoint shares (which represented 100% of the then
outstanding shares). This included 21,523 Utilipoint Series A Preferred Stock
that were converted to 687,922 Midas Medici common shares. Further, all
outstanding Utilipoint stock options at the time of the reverse merger were
exchanged for 172,597 Midas Medici stock options in accordance with the Midas
Medici stock option program, adopted on July 27, 2009. The shares of common
stock issued in connection with the reverse merger were not registered
with the Securities and Exchange Commission and are considered to be restricted
securities.
As a
result of the reverse merger, all references to common stock, preferred stock,
share and per share amounts have been retroactively restated to reflect the
exchange ratio of 31.96217203 shares of Midas Medici’s Common Stock for 1 share
of all of the classes of the Utilipoint’s common stock and preferred stock
outstanding immediately prior to the merger as if the exchange had taken place
as of the beginning of the earliest period presented.
Stock Purchase
and Reorganization
- In July 2007, the Company entered into a reorganization and stock
purchase agreement with KLI and UTPI. The terms of the agreement are
as follows:
§
|
UTPI
purchased 21,523 shares of Class A convertible voting Preferred
Stock from the Company for $1,050,000. The 21,523 shares of Class A
convertible voting Preferred Stock were exchanged for 687,922 common
shares in accordance with the reverse merger on August 21, 2009 and
retroactively presented as Common Stock in the December 31, 2008 and 2007
consolidated statements of stockholders’ deficit and comprehensive income
(loss).
|
§
|
The
Company repurchased 687,922 shares of Common Stock owned by current and
former management shareholders for
$967,031.
|
§
|
In
a transaction directly with current and former management shareholders,
KLI issued notes payable totaling $378,357 for the purchase of 269,154
shares of Common Stock.
|
Closing
and other costs of $234,868 were incurred in connection with the stock purchase
and reorganization. Of these costs, $2,900 is reflected in selling,
general and administrative expense in 2007. The balance of $231,968 is
classified as stock issuance costs and reflected as a reduction of Additional
Paid-in Capital.
Stock Issued and
Outstanding – The total number of shares of capital stock which the
Company shall have authority to issue is fifty million (50,000,000). These
shares shall be divided into two classes with 40,000,000 shares designated as
Common Stock at $.001 par value and 10,000,000 shares designated as Preferred
Stock at $.001 par value (the “Preferred Stock”). The Preferred Stock of the
Company shall be issued by the Board of Directors of the Company in one or more
classes or one or more series within any class and such classes or series shall
have such voting powers, full or limited, or no voting powers, and such
designations, preferences, limitations or restrictions as the Board of Directors
of the Company may determine, from time to time.
Holders
of shares of Common Stock shall be entitled to cast one vote for each share held
at all stockholders' meetings for all purposes, including the election of
directors.
Shares
issued and outstanding at December 31 were:
2008
|
2007
|
|||||||
Common
Stock issued (*)
|
2,192,094 | 2,136,160 | ||||||
Treasury
shares held
|
(808,611 | ) | (754,787 | ) | ||||
Common
Stock
outstanding
|
1,383,483 | 1,381,373 |
(*)
including converted retroactive restatement of Series A Preferred
Stock.
|
F-30
Preferred Stock
Dividends - Prior to the merger transaction, the Company was required to
pay preferential cumulative dividends in cash to the holders of the Series A
Preferred Stock as follows:
§
|
An
annual dividend equal to 13% of the original purchase price, payable
quarterly on October 31st, January 31st, April 30th and July 31st of each
year commencing on October 31, 2007 (the “Quarterly Dividends”). This
equated to $34,125 per
quarter.
|
§
|
Commencing
on January 31, 2010, and continuing on the last day of each month
thereafter until July 23, 2010, a dividend equal to the monthly payment
that would be payable on the Original Purchase Price based on a 24-month
amortization schedule using a 13% annual interest rate (the “Monthly
Dividends”). This equated to $49,919 per
month.
|
§
|
Upon
the first to occur of the following: (i) a liquidation of the Company;
(ii) a change in control of the Board of Directors of the Company; or
(iii) the failure to convert the Series A Preferred Stock to Common Stock
by July 23, 2010, a dividend equal to the Original Purchase Price less any
portion of the Monthly Dividends that would be allocable to principal if
the Monthly Dividends were treated as loan payments (the “Balloon
Dividend”). This equated to an $812,382 Balloon
Dividend.
|
Series A
Preferred Stock dividends were cumulative so that, if the Company was unable to
pay, or if the Board of Directors failed to declare Series A Preferred Stock
dividend for any period, such Series A Preferred Stock dividends nevertheless
accrued and were payable in subsequent periods. Any payment of Series
A Preferred Stock dividends by the Company in any period first were
to be applied to any accrued but unpaid Series A Preferred Stock dividends for
prior periods, in chronological order, and then to dividends due for that
period.
Stated
Series A Preferred Stock dividends of $136,500 and $34,125 were declared in 2008
and 2007, respectively. The Company is in a negative retained
earnings position and therefore the dividends were recorded as a reduction in
the Additional Paid in Capital. The Company would not pay any of the
Series A Preferred Stock dividends if, in the opinion of the Board of Directors,
the Company was not able to meet its debt obligations or growth
initiatives. Of the 2008 dividends, $68,250 was declared but not
paid. The 2007 declared dividend was paid.
The
discount resulting from the increasing rate feature of the Series A Preferred
Stock dividend represented an unstated dividend cost that was being amortized
over the three year period preceding payment of the Balloon Dividend using the
effective interest method, by charging the imputed dividend cost against
Additional Paid-in Capital . The total stated dividends, whether or
not declared, and unstated dividend cost combined represented a period’s total
preferred stock dividend, which was deducted from net income (loss) to arrive at
net loss available to common shareholders.
Common
Stock Put Options -In conjunction
with the July 2007 stock purchase and reorganization, the Company issued a total
of 191,390 Common Stock put options to two management stockholders (refer to
Note 13, Subsequent Events – Cancellation of Common Stock Put
Options). These agreements gave the management stockholders the right
and the option, but not obligation, to sell all of their common shares to the
Company through December 31, 2009. The agreements defined the
purchase price of the put based on original purchase price if calendar year 2007
EBITDA exceeded $520,000 or, if the management shareholder was still employed by
the Company at December 31, 2008, based on the lesser of the original purchase
price or fair market value (“FMV”) as determined by an independent valuation
expert. If the shareholders exercise their options at different
times, the FMV first determined would apply to both shareholders.
The
Common Stock put options were not exercisable at December 31, 2007 based on 2007
EBITDA. Both shareholders continued to be employed by the Company at
December 31, 2008. Management estimates the FMV as of December 31,
2008 and 2007 to be the value of the most recent per share purchase price; which
is higher than the original purchase price. Due to the absence of
quoted FMV and significant third-party transactions, this estimate is subject to
change should better inputs become available.
SFAS 157
established a three level fair value hierarchy to classify the inputs used in
measuring fair value as follows:
§
|
Level
1: Quoted prices for identical instruments in active
markets.
|
§
|
Level
2: Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-driven valuations whose inputs are observable or whose significant
value drivers are observable.
|
§
|
Level
3: Significant inputs to the valuation model are
unobservable.
|
As of
December 31, 2008 and 2007, the financial liability measured at fair value
consisted of Common Stock put options. There were no quoted prices for identical
or similar instruments in markets that were active or not active and there was
no model-driven valuation for the Common Stock put options. The fair value is
based on recent related party transactions which approximate the original
purchase price and falls within the Level 3 hierarchy of Fair Value
Measurements.
The
Common Stock put options are reflected as a liability with a corresponding
reduction to equity. The amount recorded at December 31, 2008 and
2007 was $269,000.
Loss per
Common Share - Shares of Series A
Preferred Stock issued July 23, 2007, which were converted into 687,922 shares
of common stock as a result of the merger transaction and retroactively restated
in the accompanying consolidated statements of stockholders’ deficit and
comprehensive income (loss), were not included in the basic or diluted net loss
per share since the Company included the impact of the preferred dividends and
discount accretion as adjustments to arrive at the net loss applicable to common
stockholders during the years ended December 31, 2008 and 2007. The
written put options issued July 23, 2007 for the purchase of 191,390 shares of
Common Stock were not included in the computation of diluted net loss per share
because the inclusion of such shares would have an anti-dilutive effect on the
net loss applicable to common stockholders.
Basic
earnings per share has been computed by dividing net income (loss) available to
common stockholders by the weighted average number of shares of Common Stock,
adjusted as noted above, outstanding during each period. Shares
issued during the period and shares reacquired during the period are weighted
for the portion of the period that they were outstanding. The
following table sets forth the computation of basic and diluted loss per share
for years ended December 31:
2008
|
2007
|
|||||||
Net
income (loss)
|
$
|
(299,689
|
)
|
$
|
68,063
|
|||
Less
stated preferred dividends
|
(136,500
|
)
|
(34,125
|
)
|
||||
Less
preferred stock discount accretion
|
(279,353
|
)
|
(116,232
|
)
|
||||
Net
(loss) applicable to common
stockholders
|
$
|
(715,542
|
)
|
$
|
(82,294
|
)
|
||
Shares
used in net (loss) per share;
basic
and diluted
|
679,995
|
1,065,779
|
||||||
Net
loss per share; basic and
diluted
|
$
|
(1.05
|
)
|
$
|
(0.08
|
)
|
F-31
9. COMMITMENTS
AND CONTINGENCIES
Capital
Leases - The Company is obligated under capital leases for computer
equipment that expire on various dates through December 2011. The minimum
payments for the capital leases in effect at December 31, 2008 are as
follows:
Year
ending December 31,
|
||||
2009
|
$ | 18,767 | ||
2010
|
12,448 | |||
2011
|
5,412 | |||
36,627 | ||||
Less
amount representing interest
|
3,976 | |||
Present
value of minimum lease payments
|
$ | 32,651 | ||
Short
term portion
|
$ | 16,242 | ||
Long
term portion
|
16,409 | |||
$ | 32,651 |
Equipment
recorded under capital leases was $52,439 and $36,315 as of December 31, 2008
and 2007, respectively. Accumulated amortization of capital assets
subject to capital leases amounted to $22,349 and $13,809 for fiscal years 2008
and 2007, respectively. Interest on capital leases amounted to $2,677
and $1,947 for fiscal years 2008 and 2007, respectively. Amortization
on equipment under capital leases amounted to $15,210 and $9,639 for fiscal
years 2008 and 2007, respectively.
Operating
Leases – The
Company leases buildings and equipment under various operating leases with lease
terms ranging from one to three years. The following is a schedule of
the future minimum lease payments required under operating leases that have
initial non-cancelable lease terms in excess of one year:
Fiscal
year ending December 31,
|
Minimum
Lease Commitments
|
|||
2009
|
$ | 62,057 | ||
2010
|
3,503 | |||
$ | 65,560 |
Rent
expense for office space was $78,164 and $152,463 for fiscal years 2008 and
2007, respectively. The significant decrease in office space rent
from year 2007 to 2008 is attributed primarily to the closing and lease buyout
of the Syracuse, New York office.
Stockholder
Agreements - Effective with the July 23, 2007 reorganization, the Company
had entered into stockholder agreements with its minority stockholders, some of
whom are key managers of the Company. These agreements provided the
Company the first right to purchase each stockholder’s shares in the event of a
bona fide offer from any persons to purchase shares from the
stockholder. The Company had the right to purchase such shares on the
same terms and conditions set forth in any such purchase agreement within sixty
days following the Company’s receipt of the notice to purchase.
The
agreements contained restrictions on transfer of stock to third parties and
clauses on the Company’s right to repurchase terminated shareholders shares for
a price equal to the net book value of the shares at the time of termination of
employment.
The
agreements terminated in conjunction with the merger transaction.
F-32
Employment
Agreements - The
Company has employment agreements with two key management shareholders which
grant right of first refusal to management shareholders under special
circumstances which are delineated as follows:
If there
is a proposed sale or liquidation of 100% of the Company prior to the end of the
Initial Term (July 23, 2009), then no less than thirty (30) days prior to the
consummation of such sale or liquidation, the Company shall give, or shall cause
its shareholders to give, the management shareholders, jointly, a right of first
refusal for the purchase of the Company for the same consideration as such
proposed sale or liquidation. The management shareholders shall have
the right to purchase 100% of the Company in the percentages agreed among the
management shareholders at the same price and on the same terms set forth in
such notice. The management shareholders shall provide the Company
with notice of their intent to exercise the right of first refusal within twenty
five (25) days of receiving notice of such proposed sale or liquidation and
shall consummate such purchase within thirty (30) days thereafter.
These
rights of first refusal under the employment agreements terminated in
conjunction with the merger transaction and a separation agreement.
Litigation
- The Company, in
the normal course of business, may be subject to claims and
litigation. Management is not aware of any outstanding claims or
assessments against the Company that are estimable and likely.
10. CONCENTRATION
RISKS
Credit
Concentration - The Company’s demand deposits are placed with major
financial institutions. Management believes the Company is not
exposed to undue credit risk for any demand deposits that may, from time to
time, exceed the federally insured limits.
Financing
Concentration - The Company’s capitalization has been provided by
founders, management employees, KLI and UTPI.
Revenue and
Accounts Receivable Concentration - In 2008, seven clients
individually represented from approximately 5% to 10% each of revenue. In 2007,
six clients represented from approximately 5% to 14% each of
revenue. Cumulatively, these clients comprised approximately 51% of
revenue for both years ended December 31, 2008 and 2007. Five clients each
represented 5% or higher and cumulatively 59% of net accounts receivable at
December 31, 2008. Six clients each represented 5% or higher and
cumulatively 60% of net accounts receivable at December 31,
2007. Accounts receivable associated with revenue concentration
clients were 100% collected. Revenue and accounts receivable of the
Company’s subsidiary in the Czech Republic are de minimus.
11. RELATED
PARTY TRANSACTIONS
Management
Fees - Management fees to KLI of $25,000 per quarter are payable in
advance on the 15th day of the 1st month of the quarter; January 15th, April
15th, July 15th and October 15th. Management fees paid were $50,000
and $25,000 for fiscal years 2008 and 2007, respectively.
Preferred Stock
Dividends - Commencing October 31, 2007, stated dividends on preferred
stock of $34,125 per quarter are payable to UTPI on January 31st, April 30th,
July 31st and October 31st. If the Company does not have sufficient
cash, KLI advances the funds to UTPI on behalf of the Company. The
dividend amount increases and is paid monthly commencing on January 31, 2010
with a final Balloon Dividend on July 23, 2010. See also Note 8 – Stockholders’
Deficit – Preferred Stock Dividends.
Revenues -
Revenues from KLI were $10,264 and $14,978 in 2008 and 2007,
respectively.
Legal and
Consulting Expense - A member of the Board of Directors and a law firm
which employs a relative of the Board member were reimbursed for fees in
conjunction with operational support during 2008. Expenses for the
Board member and the law firm were $52,500 and $10,864, respectively, of which
$25,000 was paid with Common Stock issued to the Board member.
F-33
12.
STOCK-BASED COMPENSATION
The
Company awarded stock-based compensation in 2007 to an employee per terms of
their employment agreement in the amount of 40,368 shares with a fair value of
$56,747. The shares vested immediately in July 2007 when the Company entered
into the reorganization and stock purchase agreement with KLI and UTPI (see Note
8). The fair value assigned to the shares was based on the purchase
price of common shares at the point of the Company’s July 2007
reorganization. There was no stock-based compensation in 2008. The
Company granted no stock options through December 31, 2008.
13. SUBSEQUENT
EVENTS
Merger
Transaction – On
August 21, 2009, Midas Medici and Utilipoint entered into a reverse merger
transaction, which resulted in Midas Medici being the “legal acquirer” and
Utilipoint the “accounting acquirer”. Prior to the merger
transaction, Midas Medici was an inactive publicly registered shell corporation
with no significant assets or operations. The executive management of
Midas Medici are key personnel of KLI. At the closing of
the merger transaction, Midas Medici ceased to be a shell
company.
Capital
Commitment Agreement with The Intelligent Project, LLC - On July 1, 2009,
the Company entered into a transaction with The Intelligent Project, LLC (“IP”),
a KLI portfolio company, and KLI. IP is a research and advisory services firm
focused on assisting utilities with the challenge of advancing and solving
customer dimension complexities of the Smart Grid. IP partners with leading
academic researchers at Purdue University in the U.S. and Maastricht University
in the Netherlands to drive primary research around consumer response to smart
grid enabled energy management. IP also tracks consumer trends around the globe
to deliver best practices surrounding consumer behavior and customer engagement
to utility leadership.
Components
of the transaction are as follows:
1)
|
The
Company entered into a capital commitment agreement with IP for an amount
of up to $200,000. IP will be able to make capital requests on
the capital commitment agreement for initial financing. The
Company will receive a 60% interest in IP in exchange for the capital
contribution agreement.
|
2)
|
The
existing members of IP will provide services to the Company in exchange
for options to purchase an aggregate of 44,747 shares of the common stock
of the Company that are fully-vested on the date of grant and that have a
strike price equal to the fair market value of the Company’s common stock
on the date of grant. The stock options for the individuals
will be granted pursuant to the equity compensation plan that was adopted
by the Company effective as of May 1, 2009. All of the stock
options will have a term of five years and a cashless exercise
option.
|
3)
|
The
Company will provide certain management services to IP in exchange for
reasonable compensation.
|
4)
|
KLI
will agree to purchase up to $100,000 of the common stock of the Company
at a per share purchase price of $50.00 per share and will agree to lend
up to $100,000 pursuant to a Revolving Senior Subordinated
Debenture.
|
The above
components are further delineated in the agreements which the Company entered
into in conjunction with the transaction. These agreements with IP
and KLI include the following:
IP
Agreements -
The IP Agreement provides that Net Cash Flow will be distributed as
follows: first, contributed capital will be returned to the members on a
pro-rata basis (based on the amount of capital contributed), and, thereafter,
Net Cash Flow will be distributed to the members on a percentage ownership
basis. The Company’s percentage ownership immediately after the
execution of the agreement by the Company will be 60%.
The
Capital Commitment Agreement provides that the Company will make capital
contributions to IP of up to $200,000.
The
Management Services Agreement provides that the Company will provide management
services to IP and provide consultants to assist IP with IP
projects. Management services will be charged to IP based on the
actual expenses incurred by the Company, and consultants will be charged at the
same rate that the Company charges to subcontract its consultants to third
parties. The Company will also pay all salaries and benefits for
certain employees of IP who will also provide services to the Company, which
will initially include two employee owners of IP.
F-34
The
Consulting Agreement provides that KLI IP Holding Inc. will provide consulting
services to the Company in connection with the joint business and marketing
efforts of the Company and IP. In exchange for its services KLI IP
Holding Inc. will receive Company stock options.
The Stock
Options Agreement provides that, in consideration of the services being provided
to the Company by IP and KLI IP Holding Inc., the Company shall issue stock
options in such amounts as set forth below. The stock options will be
fully-vested upon issuance and will have an exercise price equal to the fair
market value of the Company Common Stock on the grant date ($50). The
stock options will have a term of five years and a cashless exercise
option.
§
|
KLI
IP Holding Inc. – options to purchase 27,168
shares
|
§
|
IP
management shareholders – options to purchase 17,579
shares
|
KLI
Agreements -
The Subscription Agreement provides that KLI will purchase up to 63,924
shares of the Company’s Common Stock at a per share purchase price of $50 per
share for an aggregate consideration of up to $100,000. KLI, or its
affiliates or assigns, shall have a period of up to two months from the
execution of the Subscription Agreement to make such purchases.
The
Revolving Senior Subordinated Debenture provides that KLI may loan up to
$100,000 to the Company. The debenture has a term of five years and
pays interest at a rate of 10% per annum.
Continued Support
from Shareholders – On January 15, 2009 management shareholders and KLI
provided a combined $50,000 to meet working capital needs via purchase of common
stock of $25,000 and notes payable of $25,000 at 10% due January 15,
2014.
2009 Stock
Investment Plan –
On April 23, 2009 the Company’s 2009 Stock Investment Plan (the “Plan”) was put
into effect. Under the Plan terms, eligible participants include
directors, officers, key employees and consultants as selected by the Company’s
compensation committee (the “Committee”). Awards under the Plan may
be in the form of stock options or incentive stock options for purchase of
shares of the Company’s Common Stock at an exercise price equal to 100% of the
estimated fair market value of a share of Common Stock on the date option is
granted. Vesting terms are at the discretion of the Committee but in
no case may the exercise period of time exceed ten years. The maximum
amount of Common Stock which may be issued under the Plan is 383,546
shares.
Cancellation of
Common Stock Put Options
– On July 26, 2009, per renewal terms of one executive’s employment
agreement and on August 1, 2009 per terms of the separation agreement of a
different executive, all common stock put options were cancelled. See also Debt
Maturity Extension below.
Debt Maturity
Extension - On August 1, 2009, per terms of a separation agreement (see
also Cancellation of Common Stock Put Options above), the former Company
executive who holds the $16,000 note payable due September 23, 2009 agreed to an
extension of terms in the amount of two installments of $2,000 and $14,000 due
December 31, 2009 and January 30, 2010, respectively. The same former
Company executive also agreed to a payment date of September 30, 2009 for the
unpaid portion, $3,722 of the $9,722 note due June 2, 2009 of which $6,000 had
been paid on June 2, 2009.
F-35
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
The
following table sets forth an estimate of the costs and expenses payable by us
in connection with the offering described in this registration statement. All of
the amounts shown are estimates except the Securities and Exchange Commission
Registration Fee:
Securities
and Exchange Commission Registration Fee
|
$ | 436 | ||
FINRA
Filling Fees
|
825 | |||
Printing
Fees
|
12,000 | |||
Accounting
Fees and Expenses
|
266,052 | |||
Legal
Fees and Expenses
|
85,000 | |||
Miscellaneous
|
225,000 | |||
Total
|
$ | 589,313 |
Section
145 (“Section 145”) of the Delaware General Corporation Law, as amended (the
“DGCL”), permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that despite the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a present or former director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith. The foregoing is only a summary of the described sections
of the Delaware General Corporation Law and is qualified in its entirety by
reference to such sections.
Our
Certificate of Incorporation and bylaws provide that we shall indemnify each of
our officers and directors to the fullest extent permitted by Section
145.
Our
Certificate of Incorporation, as amended, provides that no current or former
director of ours shall be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the DGCL as the same exists or may hereafter be amended.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(Securities Act) may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The
Company issued 1,000,000 shares of common stock on December 8, 2006, to Mondo
Management Corp., for an aggregate purchase price of $17,500.
The
Company issued an aggregate of 225,000 shares of common stock on June 1, 2009 to
Nana Baffour, Johnson Kachidza, Frank Asante-Kissi and B.N. Bahadur for an
aggregate purchase price of $225.
The
Company issued 80,000 shares of common stock on July 17, 2009. 30,000 shares of
common stock on July 31, 2009 and 52,000 of common stock on August 14, 2009 to
investors for an aggregate purchase price of $340,200.
On August
21, 2009, in connection with the acquisition of Utilipoint, we issued an
aggregate of 1,348,516 shares of common stock to the Utilipoint stockholders in
exchange for 42,191 Utilipoint common shares and 172,597 options in exchange for
5,400 Utilipoint options. In addition, Knox Lawrence International, LLC, KLI IP
Holding, Inc. and UTP International LLC, former shareholders of Utilipoint,
acquired an aggregate of 889,444 shares of our common stock
and 27,168 options at the closing of the Merger. Nana Baffour, our CEO
and Johnson Kachidza, our President, are key shareholders of Knox Lawrence
International, LLC, KLI IP Holding, Inc. and UTP International, LLC. In
addition, we issued options to purchase 25,000 shares of our common stock to
David Steele, President of Utilipoint and options to purchase 10,000 of our
common stock each to Peter Shaw, Managing Director of The Intelligent Project
and Stephen Schweich, our Director.
We believe that the offer and sale of the securities referenced were exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder as transactions not involving any public offering. All of the purchasers of unregistered securities for which we relied on Section 4(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act, except for up to 35 non-accredited investors. The purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information; appropriate legends were affixed to the stock certificates issued in such transactions; and offers and sales of these securities were made without general solicitation or advertising.
II-1
1.1*
|
Form
of Underwriting Agreement between Midas Medici Group Holdings, Inc. and
National Securities Corporation.
|
2.1
|
Agreement
of Merger and Plan of Reorganization, dated as of August 10, by and among
Midas Medici Group Holdings, Inc., Utilipoint Acquisition Corp. and
Utilipoint International, Inc. (Incorporated by reference to the
Registrant’s Form 8-K filed on August 14, 2009).
|
3.1
|
Articles
of Incorporation (Incorporated by reference to Exhibit 3.1 on Form 10SB
filed May 2, 2007).
|
3.2
|
Certificate
of Ownership of Mondo Acquisition I, Inc. and Midas Medici Group Holdings,
Inc. (Incorporated by reference to the Registrant’s Form 8-K filed on May
27, 2009)
|
3.3
|
Bylaws
(Incorporated by reference to the Registrant’s Form S-1/A filed on
September 30, 2009).
|
4.1*
|
Form
of Underwriter’s Purchase Warrant
|
5.1*
|
Opinion
of Sichenzia Ross Friedman Ference LLP
|
10.1
|
Stock
Option Plan (Incorporated by reference to the Registrant’s Form 8-K filed
on July 31, 2009).
|
10.2
|
Employment
Agreement between Midas Medici Group Holdings, Inc. and Nana Baffour dated
as of July 16, 2009 (Incorporated by reference to the Registrant’s Form
8-K filed on July 22, 2009).
|
10.3
|
Employment
Agreement between Midas Medici Group Holdings, Inc. and Johnson Kachidza
dated as of July 16, 2009 (Incorporated by reference to the Registrant’s
Form 8-K filed on July 22, 2009).
|
10.4
|
Stock
Purchase Agreement dated May 15, 2009, among Mondo Acquisition I, Inc.,
Mondo Management Corp., and Midas Medici Group, Inc. (Incorporated by
reference to the Registrant’s Form 8-k filed on May 21,
2009)
|
10.5
|
Capital
Commitment Agreement between Utilipoint International, Inc. and The
Intelligent Project, LLC dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.6
|
Agreement
to be bound to the Limited Liability Company Agreement between of The
Intelligent Project, LLC dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.7
|
Limited
Liability Company Agreement of The Intelligent Project, LLC dated as of
May 22, 2009. (Incorporated by reference to the Registrant’s Form S-1/A
filed on November 3, 2009).
|
10.8
|
Consulting
Agreement between Utilipoint International, Inc. and KLI IP Holding, Inc.
dated as of July 1, 2009 (Incorporated by reference to the Registrant’s
Form S-1/A filed on September 30, 2009).
|
10.9
|
Management
Services Agreement between Utilipoint International, Inc. and The
Intelligent Project, LLC dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.10
|
Stock
Subscription Agreement executed by Knox Lawrence International, LLC dated
as of July 1, 2009 (Incorporated by reference to the Registrant’s Form
S-1/A filed on September 30, 2009).
|
10.11
|
Revolving
Senior Subordinated Note dated as of July 1, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.12
|
Form
of Subscription Agreement for sales of common stock on July 17, July 31,
and August 14, 2009 (Incorporated by reference to the Registrant’s Form
S-1/A filed on September 30, 2009).
|
10.13
|
Form
of Return to Treasury Agreement executed by Nana Baffour, Johnson
Kachidza, Frank Asante-Kissi and B.N. Bahadur effective June 29, 2009
(Incorporated by reference to the Registrant’s Form 8-K filed on July 31,
2009)
|
10.14
|
Reimbursement
Agreement between Midas Medici Group Holdings, Inc. and Knox Lawrence
International LLC dated as of August 7, 2009 (Incorporated by reference to
the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.15
|
Management
Agreement between Utilipoint International, Inc. and Knox Lawrence
International LLC dated as of July 23, 2007(Incorporated by reference to
the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.16
|
Senior
Subordinated Debenture issued by Utilipoint International, Inc. to Knox
Lawrence International LLC dated as of January 15, 2009 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.17
|
Senior
Subordinated Debenture issued by Utilipoint International, Inc. to Knox
Lawrence International LLC dated as of December 31, 2008 (Incorporated by
reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.18
|
Lease
for Utilipoint’s corporate offices in Albuquerque, New Mexico
(Incorporated by reference to the Registrant’s Form S-1/A filed on
September 30, 2009).
|
10.19
|
Lease
for Utilipoint’s corporate offices in Tulsa, Oklahoma (Incorporated by
reference to the Registrant’s Form S-1/A filed on November 3,
2009).
|
10.20
|
Lease
for Utilipoint’s corporate offices in Sugar Land, Texas (Incorporated by
reference to the Registrant’s Form S-1/A filed on November 3,
2009).
|
10.21
|
Lease
for Utilipoint’s corporate offices in Brno, Czech Republic (Incorporated
by reference to the Registrant’s Form S-1/A filed on September 30,
2009).
|
10.22
|
Revolving
Loan Agreement among Midas Medici Group Holdings, UtiliPoint
International, Inc. and Proficio Bank (Incorporated by reference to
the Registrant’s Form S-1/A filed on November 25,
2009)
|
10.23
|
Form
of Secured Revolving Promissory Note (Incorporated by reference to the
Registrant’s Form 8-K filed on October 20, 2009) (Incorporated
by reference to the Registrant’s Form S-1/A filed on November 25,
2009) (Incorporated
by reference to the Registrant’s Form S-1/A filed on November 25,
2009)
|
10.24
|
Security
Agreement among Midas Medici Group Holdings, Inc., UtiliPoint
International, Inc. and Proficio Bank. (Incorporated by reference to the
Registrant’s Form 8-K filed on October 20, 2009)
|
10.25
|
Subordination
and Standstill Agreement among, Bruce R. Robinson Trust under agreement
dated March 27, 2006, Jon Brock, Robert C. Bellemare, and Knox Lawrence
International, LLC (Incorporated by reference to the Registrant’s Form 8-K
filed on October 20, 2009)
|
10.26
|
Comfort
Letter by Knox Lawrence International, LLC (Incorporated by reference to
the Registrant’s Form 8-K filed on October 20, 2009)
|
10.27
|
Letter
Agreement between Forbes Magazine and Utlipoint International, Inc. dated
as of October 2, 2009(Incorporated by reference to the Registrant’s Form
S-1/A filed on November 3, 2009).
|
10.28* | Registration Rights Agreement among Midas Medici Geoup Holdings, Inc. and the holders signatures thereto. |
14.1
|
Code
of Ethics (Incorporated by reference to the Registrant’s Form S-1/A filed
on September 30, 2009).
|
16.1
|
Letter
from Russell Bedford International dated July 24, 2009 (Incorporated by
reference to the Registrant’s Form 8-K/A filed on July 28,
2009).
|
21
|
Subsidiaries
(Incorporated by reference to the Registrant’s Form S-1/A filed on
September 30, 2009).
|
23.1*
|
Consent
of REDW LLC.
|
23.2*
|
Consent
of Sichenzia Ross Friedman Ference LLP (included in Exhibit
5.1)
|
* Filed
herewith.
II-2
(a) The
undersigned registrant hereby undertakes to:
(1) File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
i.
Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the “Securities Act”);
ii.
Reflect in the prospectus any facts or events which, individually or in the
aggregate, represent a fundamental change in the information in the registration
statement.
Notwithstanding
the foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Commission (the “Commission”) pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement.
iii.
Include any additional or changed material information on the plan of
distribution.
(2) For
determining liability under the Securities Act, treat each such post-effective
amendment as a new registration statement relating to the securities offered,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering.
(3) File
a post-effective amendment to remove from registration by means of a
post-effective amendment any of the securities that remain unsold at the end of
the offering.
(4) For
determining liability of the undersigned small business issuer under the
Securities Act to any purchaser in the initial distribution of the securities,
the undersigned small business issuer undertakes that in a primary
offering of securities of the undersigned small business issuer pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned small
business issuer will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser:
i. Any
preliminary prospectus or prospectus of the undersigned small business issuer
relating to the offering required to be filed pursuant to Rule 424;
ii. Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned small business issuer or used or referred to by the undersigned
small business issuer;
iii. The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned small business issuer or its
securities provided by or on behalf of the undersigned small business issuer;
and
iv. Any
other communication that is an offer in the offering made by the undersigned
small business issuer to the purchaser.
(b)
Provide to the underwriters at the closing specified in the underwriting
agreements, certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each
purchaser.
(c)
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(d) (1)
For determining any liability under the Securities Act, treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
small business issuer under Rule 424(b)(1), or (4), or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For
determining any liability under the Securities Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement for
the securities offered in the registration statement, and that offering of the
securities at that time as the initial bona fide offering of those
securities.
II-3
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city
of New York, in the State of New York, on February 3, 2010 .
Midas
Medici Group Holdings, Inc.
|
|||
By:
|
/s/ Nana
Baffour
|
||
Nana
Baffour
CEO,
Co-Executive Chairman (Principal
Executive
Officer) and Director
|
|||
By:
|
/s/ Johnson
M. Kachidza
|
||
Johnson
M. Kachidza
|
|||
CFO,
President, Co-Executive Chairman (Principal Financial and Accounting
Officer) and Director
|
|||
POWER
OF ATTORNEY
In
accordance with the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons on behalf of the
Company in the capacities and on the dates indicated.
NAME
|
TITLE
|
DATE
|
||
/s/
Nana Baffour
|
||||
Nana
Baffour
|
CEO,
Co-Executive Chairman
(Principal
Executive Officer) and Director
|
February 3, 2010
|
||
/s/
Johnson M. Kachidza*
|
||||
Johnson
M. Kachidza
|
CFO,
President, Co-Executive Chairman (Principal Financial and Accounting
Officer) and
Director
|
February 3, 2010
|
||
/s/
Stephen Schweich*
|
||||
Stephen
Schweich
|
Director
|
February 3, 2010
|
||
/s/
Frank Henson
|
||||
Frank
Henson
|
Director
|
February 3, 2010
|
||
*By: /s/ Nana Baffour | ||||
Nana Baffour, attorney-in-fact |
II-4